Massey resumes work on advice degree

Massey University is recommencing work on the development of a financial advice degree.

Tuesday, May 30th 2017, 6:00AM 14 Comments

by Susan Edmunds

Research was conducted in 2013 as part of planning for the potential development of a course.

At the time, Massey said there were requests from the sector for the qualifcation, to boost professionalism.

It was intended to be similar to the Bachelor of Accounting for accountants.

But Deputy Pro Vice-Chancellor Claire Matthews said the degree was put on hold because there needed to be a sufficient market for it to justify its development.

“We also need to be sure that the content and structure meets the market’s requirements.  This is now being picked up again, and we are working with an external third party on that development.”

That third party is Strategi.

Its managing director David Greenslade said other countries, such as Australia, were moving quickly to degree requirements for financial advisers.

He said Massey was going through a process of looking at its current diploma, which he said had “next to no” students coming through, and said it made sense to build that up to become a major of the Bachelor of Business Studies.

Those who had the level five certificate could then cross-credit it to the degree, he said. “That’s the logical move but everything has got to be integrated in. We need to start discussions with the Code Working Group to make sure it is not a useless degree. TI has to be fit for purpose for the future and has to be reasonably practical.”

Ara, the institution formed through a merger of CPIT and Aoraki Polytechnic, launched a graduate diploma and degree major in financial planning in 2016.

It has had six students through the major this year.

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Comments from our readers

On 30 May 2017 at 10:23 am Brent Sheather said:
The worry here is that “the contents and structure meets the market’s requirements”. As we see all the time with CPD very few financial advisers will buy any CPD that threatens their business model and the business model typically is “makes things as complex as possible, trade frequently, ignore tracking error, benchmarks and best practise”. If you are reading this Claire be very careful that your process is not captured by industry. The starting point here is to look at best practice as evidenced by the portfolios and strategies of the average pension fund.


Regards
Brent Sheather
On 30 May 2017 at 12:05 pm smitty said:
I would venture to suggest that it always starts with the fundamentals, not portfolio or strategies of pension funds. These are but a byproduct of an investment decision to suit a particular need or a client, or as you say a "peddling salesman". Better to be exposed to all investment philosophy or theories and one can decide form themselves.
On 30 May 2017 at 2:52 pm R1 said:
Have to agree with Brent. It would be very damaging for Massey to have content influenced by the biases of the industry. Will be very interested to see what they have to offer as a qual. as there is a real lack of quality when it comes to formal study; including the L5 Nat.Cert. AFAs are required to do now. This would be a real opportunity to lift standards and earn some truly valuable CPD credits. I hope Massey does the right thing and doesn't have an industry sponsored programme like some of the research.
On 30 May 2017 at 5:30 pm Pragmatic said:
Groan – it must be that time of the year again when I find myself compelled to respond to Brent’s myopic perspective and attack on the industry. Firstly, I take exception to the constant criticism towards those advisors who continually chose to improve their knowledge by attending regular events / courses / reading on financial matters. I’m yet to see you at one of these – either onshore or offshore.

Very few industry participants appear to be motivated by preserving their business models, or enhancing complexity, moreso they are seeking improved outcomes for their clients.

Whilst I agree that frequent trading doesn’t tend to add much value for the client (albeit generating increased revenue for the advisor), the concept of tracking error and benchmarks are outdated and not best practice. This is not to say that this style of investing is not relevant for “the average pension fund” who have very different time horizons and liability profiles that they are managing to.

Brent – whilst I enjoy your frequent banter around industry issues, the majority of today’s industry participants are working for the benefit of their clients, and are constantly looking to improve client outcomes through ongoing training etc. Perhaps it’s time for you to take another look at your industry peers before dispatching your latest round of cynicism.
On 31 May 2017 at 9:48 am John Milner said:
Pragmatic, I can certainly understand your sentiment regarding Brent's regular comments. However, I don't believe many advisers or providers have given Brent much reason to change his view frankly.

I continue to review investment plans and institutional offers to the public that had its day 20 years ago. Not that they provided much value then either.

Yes, there are advisers attending events and courses and I applaud them for doing so. However, from some events I have attended lately, it appears the blind are leading the blind. I only lasted until morning tea at one recent event as I could no longer take the faithful nodding heads listening to what was dated rhetoric from a group of active managers.

I also have to say I was very disappointed with one of my last Massey papers a few years ago where the lecturer used his position as a platform to promote the IFA over any other industry group. I don't believe this was appropriate and I hope this is not repeated.
On 31 May 2017 at 9:57 am R1 said:
Pragmatic, just from my perspective, I attend quite a few events and courses but most of it is not worthy of CPD credits but I go because I have to get the credits.

I would have to say the last CPA/INFNZ Fintech 1 dayer is an exception (as are some of their AUT colloborations); it focused on techno developments and its applications rather than how to sell yourself and manage your business (which should not receive CPD credits in my opinion - it does not improve my knowledge of giving appropriate advice to clients).

If Massey can offer an independent course focused on the financial advice processes and principles that I can complete remotely over a few years I will be happy to pay good money for it and get this monkey of attending networking and sales events to earn CPD credits off my back; a waste of time and money.
On 31 May 2017 at 12:56 pm Brent Sheather said:
Thanks Pragmatic. I do lots of CPD but the CPD I do actually brings me closer to best practice where best practice is the sort of thing the NZ Super Fund does and super funds around the world. This involves minimising risk, focusing on value and keeping fees low. Without wanting to blow my own trumpet too much embracing best practice is probably the reason why we manage almost $1bn from Whakatane with just two and a half advisors and no advertising budget.

I think my comment that advisors are reluctant to buy CPD that threatens their business model might be relevant. If you went to a CPD event that told you that the lowest risk portfolio was the market portfolio and fees were critical therefore you should buy an index fund like Vanguard Total World Stock ETF (VT) from Vanguard would that threaten your business model? My honest view is that this sort of product is the best way of achieving client outcomes.

Also your comment that the average pension fund is not the relevant benchmark for best behaviour is inappropriate in my view. Low cost and low risk works for everybody, according to all the CPD I do.
On 1 June 2017 at 2:36 pm smitty said:
Brent, I disagree with your latest comment. I am attending the NZX ETF CPD event soon, but I don't "sell" that product. I have made the personal call to attend to broaden knowledge. Perhaps your comment should be directed to the internal bank CPD events, where the likes of a red, yellow, blue bank, you name it, can attend an internal "ra-ra" session about all their own products and yet claim this as professional development? If so, then paint that picture, rather than condemning most advisers to this category.
On 7 June 2017 at 1:15 pm Pragmatic said:
Apologies for the delayed response, as my initial reference didn't get published.
To assist in understanding the investment philosophy for many of the world's pension funds, a useful starting point is a paper by Citi Group outlining the Unfunded Pension Crisis: https://ir.citi.com/CqVpQhBifberuzZKpfhSN25DVSesdUwJwM61ZTqQKceXp0o/0F4CbFnnAYI1rRjW

I won't bore you with the content, suffice to say that the often-referred-to "best practice of pensions funds" has many differing metrics and time-frames than the average investor (ie: most of the readers' clients)

The real issue (demographics & mortality aside) from an investment industry perspective is reflected in this paper entitled the Unavoidable Pension Crisis https://www.advisorperspectives.com/commentaries/2017/05/15/the-unavoidable-pension-crisis.pdf. My quote of choice from this paper is "Pensions STILL have annual investment return assumptions ranging between 7–8% even after years
of under-performance".

The report goes on to apply simple maths to illustrate the deficiencies of what some commentators have encouraged the industry to"...look at best practice as evidenced by the portfolios and strategies of the average pension fund...". Enjoy
On 8 June 2017 at 9:12 am Brent Sheather said:
Desperate stuff Pragmatic but you do raise one useful point: Yes the balanced pension fund return assumptions of 7-8% pa are ridiculous and have been noted as such by experts for years now. Nothing new there given that the 10 year treasury is yielding 2% and international stock markets are priced to return 6%.

So what is the rational response to prospective low returns that we have seen from institutional investors? Obviously there are two options – try to beat the market or do as well as the market and minimise fees. The facts, as they so often do, get in the way of the rhetoric: all the SPIVA data shows that most fund managers, if not all, underperform in the longer term after fees so a low return environment just makes minimising fees that much more a rational response. That’s that rationale for the huge move we have seen in the last 10 years away from high cost active to low cost passive. The Financial Times estimates that in the past 10 years US$1.4 trillion ($2t) has moved into passive funds and at the same time US$1.2t has flowed out of actively managed funds.

By the way you didn’t answer the big question in my earlier response to you: “If you went to a CPD event that told you that the lowest risk portfolio was the market portfolio and fees were critical therefore you should buy the Vanguard Total World Stock Index Fund would that threaten your business model?” A simple yes or no will do. Enjoy.

Regards
Brent
On 8 June 2017 at 4:53 pm Pragmatic said:
Thanks Brent – always lots to follow up on from your thoughts.

“all the SPIVA data shows that most fund managers, if not all, underperform in the longer term after fees so a low return environment just makes minimising fees that much more a rational response.” Whilst I suspect that you’ve added the “…if not all…” for dramatic effect, there is truth in the fact that most active managers underperform over the longer timeframes. Part of the value proposition for advisors is to filter out these, to determine which investment solutions are appropriate for the client and the investment conditions. There are still plenty of active Managers who continue to add significant value…

No dispute over the transference of monies from active to passive over the past decade, with many active managers simply being unable to meet expectations.

“If you went to a CPD event that told you that the lowest risk portfolio was the market portfolio and fees were critical therefore you should buy the Vanguard Total World Stock Index Fund would that threaten your business model?” No. But then fees aren’t the sole metric to judge an investment solution by, nor are active versus passive Managers. In fact, Managed Funds (irrespective of their structure) are not the sole solutions for portfolio construction. The answer is to seek investment solutions that are appropriate for the investor and relevant in the investment conditions. Sadly, the weight of money transferring from active to passive globally doesn’t necessarily reflect this logic. Moreso, low management fees permit a complacent advisory community to preserve their own margins whilst delivering mediocrity to their clients.

BTW: Take a read of the articles that I referred to – or even Google “Unfunded Pensions” – as there are loads of respected global commentators reinforcing the previous observations.
On 9 June 2017 at 9:27 am Dirty Harry said:
Brent:
No.
And I grow weary of your constant assertions that most advisers would answer yes.
Maybe some. But you go too far.
On 13 June 2017 at 9:46 am Pragmatic said:
Thanks Brent – always lots to follow up on from your thoughts.

“all the SPIVA data shows that most fund managers, if not all, underperform in the longer term after fees so a low return environment just makes minimising fees that much more a rational response.”

Whilst I suspect that you’ve added the “…if not all…” for dramatic effect, there is truth in the fact that most active managers underperform over the longer timeframes. Part of the value proposition for advisors is to filter out these, to determine which investment solutions are appropriate for the client and the investment conditions. There are still plenty of active Managers who continue to add significant value…

No dispute over the transference of monies from active to passive over the past decade, with many active managers simply being unable to meet expectations.

“If you went to a CPD event that told you that the lowest risk portfolio was the market portfolio and fees were critical therefore you should buy the Vanguard Total World Stock Index Fund would that threaten your business model?” No. But then fees aren’t the sole metric to judge an investment solution by, nor are active versus passive Managers. In fact, Managed Funds (irrespective of their structure) are not the sole solutions for portfolio construction. The answer is to seek investment solutions that are appropriate for the investor and relevant in the investment conditions. Sadly, the weight of money transferring from active to passive globally doesn’t necessarily reflect this logic. Moreso, low management fees permit a complacent advisory community to preserve their own margins whilst delivering mediocrity to their clients.

BTW: Take a read of the articles that I referred to – or even Google “Unfunded Pensions” – as there are loads of respected global commentators reinforcing the previous observations.
On 20 June 2017 at 5:51 pm charliegirl said:
Seems no-one in this trail of discussion is talking about comprehensive financial planning advice for this degree, only investment advice. I appreciate the different philosophies on investing however, investment is the means for a client to meet their goals and as we know, investment encompasses many area, not just equity/bond portfolios.
The degree needs to be all encompassing and cover off all facets of financial planning and involved goal based planning & advice

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