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Regulation pushes firms to vertical integration

Fisher Funds chief executive Bruce McLachlan says new regulation is creating an environment in which it is easier for product providers, such as fund managers, to have their advisers in-house.

Monday, February 17th 2020, 6:00AM 5 Comments

Fisher Funds has been growing its advice team, now at about 15.

Milford Asset Management is expanding its private wealth offering, planning offices around the country. Pie Funds is also building up its wealth team.

McLachlan said there were a couple of factors driving the growth. He said there was now less delineation between fund managers, wealth managers, product managers and investment advice.

“The new world of regulation means product manufacturers have increased obligation to ensure clients get the right outcome. It’s easier to manage a client outcome when you have got your own employees selling the product.”

But he said clients were also finding their need for advice was largely unmet in the marketplace at present. The market for managed funds was still small relative to where it could or should be, he said.

To grow demand, providers would need to invest in the client end and help to build their understanding of the product, he said, and how it could be of value to consumers.

“It’s a natural extension of the growing market as well as regulation.”

Milford Asset Management head of private wealth Philip Morgan Rees said it currently has 15 AFA advisers based in Auckland, Christchurch and Wanaka but there are clients spread across the country.

As the business continued to grow, there would be advantage in having more advisers based in areas where there was demand for advice, he said.

The timetable for setting up new offices and the locations would depend on finding the right people, he said. The Christchurch office opened in 2018 because the right adviser had been found for it, he said.

There was a strong client base to service in areas such as Wellington, Hamilton and Tauranga, he said but also good and growing client bases in Northland and Hawke’s Bay. “It’s really a case of finding the right person and developing the office from there.”

Morgan Rees said there was a lot of demand for personalised advice. Milford would go through the process of becoming a licensed financial advice provider later this year, he said.

“We’re still seeing a lot of demand from people looking for advice that takes into account their goals.”

Tags: financial advisers Fisher Funds Milford Asset Management pie funds

« Insurers argue cutting commissions will lead to poor customer outcomesLow interest rate environment creates adviser opportunity »

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Comments from our readers

On 17 February 2020 at 11:14 am Davidvs said:
It interesting that this article flicks between referring to these fund manager employees 'selling' then as part of an 'advice' team.

Also interesting, post the recent Australian Royal Commission, fund product providers across the Tasman are moving away from vertical integration due to the inherent conflicts. While vertical integration of funds management is a perfectly legitamate business strategy, hopefully consumers in NZ will receive sufficient information to be able to clearly see such people as nothing more than salespersons of their employer's products and not advisers in the true sense.
On 17 February 2020 at 9:01 pm dcwhyte said:
@Davidvs - precisely why over 30% of submissions on the draft legislation advocated making a clear and unequivocal distinction between sales and advice. This was ignored by MBIE as the Regulatory Impact Statement had previously rejected the notion of providing the consumer with this transparency in order to avoid creating two classes of adviser.

Then we got 'financial adviser','nominated representative', 'interposed person', and 'authorised body' - and the consumer is supposed to be better able to understand the rules and regulations now. Go figure!
On 18 February 2020 at 6:48 am Murray Weatherston said:
@Laird
Don't lay all the blame on MBIE.
I well remember an industry association meeting with officials where we (i thought collectively) were arguing for a strong distinction between sales and advice (participants might remember my venn diagram with no intersection) and we were completely undermined by the rep of one of the largest groups.
When I questioned MBIE at a later meeting what they meant in a reference in a publication to "a vigorous debate" about sales v advice, officials referred me only to that earlier meeting.
Go figure.
On 18 February 2020 at 9:49 am John Milner said:
How ironic it is. I met two ex-bank AFA's at last weeks FSC seminar who had left to join a fund manager.
Seems we're just changing shingles and not addressing the issues that were uncovered in Australia of VIO's. Here we go again.
On 18 February 2020 at 10:46 pm dcwhyte said:
Muzza - I must have missed that meeting - and the 'vigorous debate'.
John M has it right - product providers retaining salespeople masquerading as 'advisers' when they're nothing more than de facto tied agents.

What chance does the consumer stand?

Exactly what happened in Australia.

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