by Susan Edmunds
I am the Head of Wealth Management and Advice at Milford Asset Management. This role is responsible for Milford's distribution channels across Private Wealth, Premier Client Services, wholesale clients and KiwiSaver. A team of 21 professionals and I'm very fortunate to lead such a great team.
After finishing university (Business Studies at Massey in Palmerston North, where I grew up), I travelled and worked in the U.K. and Europe for five years, and worked in several banking and finance contracting roles. I decided when I returned to New Zealand, in 1995, that financial services was where I wanted to develop a long-term career, so I spoke to the key financial services recruitment consultants and was offered a role with BT Funds Management. At that time, BT was just establishing its foothold in New Zealand. They were great years while we built the business with the help of the advisory community. I was lucky to be working with some of best people in the game, whose names are still synonymous with the advent of funds management in New Zealand, such as Jacqui Staley, Maurice MacLaren and Craig Stobo, to name just a few!
That the public don't take financial advice seriously enough. In many ways, New Zealand is still a very immature market and people don't think they need advice, or see value in it. They think it's something they should just get for free, but they wouldn’t think that about dealing with their lawyer, accountant or dentist. As an industry, I don't think we have done enough to demonstrate to consumers the benefits of engaging with an adviser and getting good advice from an early stage in your working life. There hasn’t been enough marketing of the industry and profession by the various industry bodies which have existed over many years.
My father has always said, "Son - if a job's worth doing, it's worth doing properly". In terms of financial advice, it was the words of Craig Stobo in one of the BT TV ads in the late 1990s/early 2000s (the one with his blue tie with the white stars - many readers will remember it!) and that is, “It’s time in the market, rather than timing the market that counts”.
At the end of day, financial advice is all about a relationship between an adviser and client. It is a service industry, and in this day and age of technology, price discovery and instant gratification, I think we can learn a lot from businesses and industries that make it very easy for the consumer to get what they want, when they want, on their terms. Businesses like Uber, AirBnB, Google. How do we make financial advice accessible to consumers in a convenient and cost-effective way? I'm not talking about roboadvice, although I'm sure some of the features and services that robo will provide will determine how face-to-face advice is delivered in future. Consumers will demand it. Fintech and Artificial Intelligence are going to become more and more important, and part of how financial advice will be delivered in future. If advisers aren’t learning more about this, then they are already behind the 8 ball.
I think most financial advisers have a pretty good appreciation for fund managers. We are a hardworking and dedicated bunch – just like the advisers we serve! I think New Zealand has a very good selection of managers and products provided by some excellent boutique managers through to institutionally-owned managers. Just like advisers, fund managers’ costs to deliver their products and services under the new licencing and regulatory environment have increased significantly. We are certainly not getting fat off the management fees! On top of that, many of the boutique and privately-owned managers are investing more into, and growing their investment teams to support growth in the NZ financial services sector. I’d like to see New Zealand advisers support New Zealand homegrown managers and their products over offshore products where appropriate. We have some of the best and most experienced investment professionals right here in God’s Own. Please support us!
I think the FMA has done a very good job of bringing more structure and discipline to the oversight of financial services, advisers and providers, in a market which previously had very little structure. I think the industry is still learning how to deal with and manage all of the regulation which has arrived over a fairly short period of time, and the FMA is definitely still learning from the industry. I like that the FMA is open to feedback and discussion and willing to listen to help improve things where possible. What I think it could do better is to be more of a ‘voice’ for the industry and help promote the quality and calibre of AFAs and the broader industry, so that people feel confident and see value in dealing with an AFA or a fund manager. Despite all the new regulation, compliance and governance implemented over the past few years, the public still don’t know who to trust with their money and are still getting their advice from friends or family. They are looking for some sort of independent endorsement of industry participants. The FMA could have a hand in that promotion somehow.
Well, firstly, let’s acknowledge that KiwiSaver has been a fantastic success – far more so than any of the early predictions. There have been several suggestions on how we can improve it from here, and there is an industry working group doing work on this. One of those areas for improvement is adding in more contribution rates other than the 3%, 4% and 8% currently. Why not start at 2%, and then allow the member to contribute as much as they like from their income in 1% increments with matching from the employer up to, say, 5%? As we know, most people in KiwiSaver, even if they are contributing 8%, are still only going to end up with a modest lump sum at 65, so need to be doing more than that. I think the biggest issue with KiwiSaver, though, is there is still far too many members with their money in the conservative default options getting very low returns, and have not benefited from the bull run in markets over the past eight-nine years. That will cost those members big time in the end. There should be a maximum amount of time a member in a default fund can stay there without being contacted, to at least have a discussion about moving to a more suitable fund. Some of the default providers are doing a good job of this, but I understand it can be difficult to contact members to even start that conversation.
I think most providers are already doing a fair bit to try and educate their members. You see it in the publications and communications that are being sent to their members, and some are doing seminars and presentations to their members as well. Social media is also proving to be a useful tool for education, especially for the younger members like the millennials, who have the most to gain from making informed decisions about their KiwiSaver. The real question is, are the members open to being educated? In many cases for the default providers, the members they are dealing with don’t even know they are in KiwiSaver, let alone being open to education.
I think we are still grappling with that as an industry. If you think about all the regulation over the past seven-eight years covering FAA, AML/CFT, FMCA, FATCA, AEOI etc., we have gone through a lot of change, most of it to protect the consumer. It has taken a lot of time, energy and cost for advisers and fund managers, and that cost has not been passed on to the end investor or client. The question I always ask is, “What is the problem we are trying to fix, and is the solution appropriate for the size of the problem?” I think the jury is still out on that one right now in some areas. I’m not sure the consumer is even aware of a lot of the regulation which has been brought in to protect them, so how can they see benefit in it? I’d like to see more promotion of the benefits of regulation for the end consumer coming from the regulator and our industry bodies.
Yes, I do, but I think the challenge for Financial Advice NZ is to become a strong and united voice for advisers with the regulator, the media and the public. They need to promote the benefits of advice to the end consumer. I hope Financial Advice NZ is an outward-looking organisation and doesn’t get tied up in knots on being internally focused.
Technology. I don’t mean just roboadvice, because I think there will always be a place and time where clients will want to talk to a human being. But if we do not make our products and services as easily accessible and convenient, and put control in the hands of the consumer in the way companies like Uber and AirBnB have done, they will seek out alternatives. Who will be an adviser’s main competitor in five or ten years’ time? I don’t think we know the answer to that, but we do know they probably don’t exist today.
Again, I think it comes back to how advisers and the industry are promoted and public awareness is created. As the old saying goes, “You can’t sell a secret!” As more and more KiwiSaver members approach 65 with larger balances, seeking good advice is going to be vitally important. We need the public to have the confidence to seek that advice from someone they perceive to be a trusted professional, in the same way as they view their dentist, doctor or accountant to be a trusted professional. I don’t think we are there yet, which is why we need the various industry organisations to do more in this area. Unfortunately, the stories of the Ponzi scheme or rogue adviser which make the front page of the newspaper affect all advisers. The public should have confidence that advisers are honest, experienced, trained professionals who have the clients’ best interests at heart and can be trusted wholeheartedly.
Yes, absolutely. I've been in since the very beginning. Why wouldn't you be?!
Growth. I'm in the Milford Active Growth KiwiSaver Fund and very happy with it!
With a young and growing family - two teenage boys and a 12-year-old daughter - most time is spent with my wife and I managing the week around various sports games, trainings, school and family events. We are a pretty active family, and enjoy getting out for beach walks, skiing, surfing and mountain biking when we can. Four years ago, my boys learned to surf and so I (maybe foolishly) decided I was spending so much time in the water, pushing them into waves, I might as well join them. So at the ripe old age of 45, I took up surfing (longboarding). It’s fair to say I’m still learning, but we have some great days in the water with the kids – even if we don’t catch many waves! I also try to keep fit by going to the gym, doing spin classes or boxing fit classes two-three times a week. I’m also a keen rugby and motorsport fan and love the V8 Supercars. (I mentioned I was from Palmy North originally didn’t I?)
Great! Both my teenage sons are studying economics and business studies at school, and we discuss career prospects regularly, including becoming an adviser. I think the financial services industry is becoming a more and more vital service provider to consumers, especially with KiwiSaver. I’ve been attending industry events now for 20+ years and I do see a succession issue for the industry (still lots of grey haired, late 50s/early 60s advisers). Who will be the advisers of the future? I’d encourage any young person to become an adviser. The industry needs it, too. How will we meet the needs of the growing, affluent, younger generation in terms of technology and services if we keep thinking like the 90s?
In the early 90s, I was a chauffeur and assistant to a German princess, in Germany. My girlfriend (now my wife) was the nanny to her four children. We lived the high life for 18 months. Castles, a garage full of exotic cars, flying around Europe in a Lear jet, summers at the lake and winters skiing in the alps - and getting paid for it! It opened our eyes to a whole other level of wealth.
I love motorsport, skiing, surfing and travelling - so if I could combine all of that and get paid for it that would be utopia! Formula 1 driver maybe?
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