tmmonline.nz  |   landlords.co.nz        About Good Returns  |  Advertise  |  Contact Us  |  Terms & Conditions  |  RSS Feeds

NZ's Financial Adviser News Centre

GR Logo
Last Article Uploaded: Tuesday, March 19th, 6:25PM

News

rss
Latest Headlines

FMA ramps up opposition to trail commissions

The Financial Markets Authority dishes out bouquets and brickbats to funds managers in a new report - but mainly brickbats.

Wednesday, May 18th 2022, 9:19PM 2 Comments

The regulator has run a pilot programme trialling its so called "value for money" guidelines with 14 managed investment schemes (MIS).

The participants were a mix of volunteers and co-opted and covered KiwiSaver providers, non-KiwiSaver funds, passive and active managers and banks and non-banks (but who took part in the pilot is undisclosed).

A number of themes are reported by the regulator with the two main ones being the use of benchmarks and commissions paid to advisers and others.

One area of praise was that MIS schemes "are showing repeatable performance, relative to appropriate market indices."

However, it then takes aim at them as argues many are using inappropriate benchmarks.

“A related point made during the pilot is passive funds are not a useful performance reference point for active strategies. This is nonsense.”

It also found fund managers commonly paid “substantial” commission to third parties for introducing new members to their funds, only some of which were financial advisers helping investors make good investment decisions.

Again the regulator is unambiguous: “Some MIS managers stated they, not members, met the cost of trail commissions because it was paid from management fee revenue. This is nonsense,” it says.

Managers clearly pushed back on some of the FMA's findings, but the regulator used phrases like "this is nonsense" to counter their arguments.

It has strongly pushed back on the argument that it is driving a race to the bottom and an endorsement of passive strategies.

"The FMA does not accept this argument. The guidance explicitly states value for money does not necessarily mean cheapest."

It says if a manager is not delivering value for money, then a "good outcome" would the for "serially underperforming active funds to change strategy to passive (and charge less accordingly); or for MIS Managers of serially underperforming active or passive funds to exit those products."

 

Tags: FMA VFM

« NZ Super Fund hit hard by global market volatilityTough times ahead for NZ economy: Nikko economist »

Special Offers

Comments from our readers

On 19 May 2022 at 7:29 am Pragmatic said:
It will be interesting to read the future FMA insights into the role of active v passive investing following a period of prolonged volatility.

Whilst I agree that consumers must focus on the after-fees value (net) that their investments have delivered, I would suggest caution around measurability timeframes and remind the regulator that the majority of benchmarks are irrelevant and developed ‘for the industry, by the industry’.
On 23 May 2022 at 4:27 pm LNF said:
For those with a high level of activity in this area - the day after this comes in - your business value drops to zero

Sign In to add your comment

 

print

Printable version  

print

Email to a friend
News Bites
Latest Comments
Subscribe Now

Weekly Wrap

Previous News
Most Commented On
Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.24 6.79 6.65
ANZ 8.64 7.84 7.39 7.25
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 7.24 6.79 6.65
ASB Bank 8.64 7.24 6.79 6.65
ASB Better Homes Top Up - - - 1.00
Avanti Finance 9.15 - - -
Basecorp Finance 9.60 - - -
Bluestone 9.24 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Classic - 7.24 6.79 6.65
BNZ - Green Home Loan top-ups - - - 1.00
BNZ - Mortgage One 8.69 - - -
BNZ - Rapid Repay 8.69 - - -
BNZ - Std, FlyBuys 8.69 7.84 7.39 7.25
BNZ - TotalMoney 8.69 - - -
CFML Loans 9.45 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 7.04 - -
Co-operative Bank - Owner Occ 8.40 7.24 ▼6.79 ▼6.65
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 7.74 ▼7.29 ▼7.15
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
First Credit Union Standard 8.50 7.99 7.85 -
Heartland Bank - Online 7.99 6.69 6.45 6.19
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.60 7.40 -
HSBC Premier 8.59 - - -
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 7.85 7.05 ▼6.75 6.59
Lender Flt 1yr 2yr 3yr
Kainga Ora 8.64 7.79 ▼7.39 ▼7.25
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 8.25 7.79 7.55
Kiwibank - Offset 8.50 - - -
Kiwibank Special - 7.25 6.79 6.65
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 9.00 7.75 7.35 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
Resimac - LVR < 80% 8.84 8.30 7.89 7.69
Lender Flt 1yr 2yr 3yr
Resimac - LVR < 90% 9.84 9.30 8.89 8.69
Resimac - Specialist Clear (Alt Doc) - - 8.99 -
Resimac - Specialist Clear (Full Doc) - - 9.49 -
SBS Bank 8.74 7.84 7.45 7.25
SBS Bank Special - 7.24 6.85 6.65
SBS Construction lending for FHB - - - -
SBS FirstHome Combo 6.19 6.74 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
Select Home Loans 9.24 - - -
TSB Bank 9.44 8.04 7.55 7.45
Lender Flt 1yr 2yr 3yr
TSB Special 8.64 7.24 6.75 6.65
Unity 8.64 6.99 ▼6.79 -
Unity First Home Buyer special - - 6.45 -
Wairarapa Building Society 8.60 7.15 6.85 -
Westpac 8.64 7.89 7.49 7.25
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - 7.29 6.89 6.65
Median 8.64 7.29 7.32 6.65

Last updated: 14 March 2024 9:32am

About Us  |  Advertise  |  Contact Us  |  Terms & Conditions  |  Privacy Policy  |  RSS Feeds  |  Letters  |  Archive  |  Toolbox  |  Disclaimer
 
Site by Web Developer and eyelovedesign.com