Geo Focus Group

New ZealandJuly 2009

History of financial planning

• Started late 1980’s• Advisers came from banks and tied

insurance arrangements• Evolution of industry body IIAA, IAFP, IFA

Key distribution channels for financial advice

• Banks – Salaried advisers• Self-employed financial planning investment

advisers and insurance advisers• Insurance contracted advisers• Share brokers• Networks/Dealer Groups

What does planning consist of?

• Advisers not yet registered so no firm statistics

• Possibly only 20% do comprehensive advice with financial plan

• Majority do ‘limited advice’ or transaction only

• Emphasis still on remuneration from product sales not advice

What does planning consist of?

• Traditional financial planner client is a retiree with lump sum and needs income

• Baby boomer client base• Insurance advisers focus on 25 – 50 age range• New Zealanders have an obsession with

property

What does planning consist of?

• Financial plans cover all disciplines – cashflow/debt management, investments, insurance, tax and estate planning, retirement planning

• Some college education advice but not huge

• Tax regime is simple in New Zealand. So bigger focus on investment than tax

Regulation

• Financial Advisers Act 2008• Regulations being drafted now• Implementation 2010• All advisers will need to be registered• AFA (Authorised Financial Adviser)• QFE (Qualifying Financial Entity)• Minimum education standard involved• Adviser will now have to pay

Compensation

• Majority is commission• Possibly only 20% are fee only• Some charge fee and commission• Fee largely linked to FUM amount• Depends on the type of advice• Pressure rising for more fees

State of the market

• Clients suffered capital losses• Poor advice• Industry in public spotlight• Mainly product focus e.g. finance

companies and CDO products• Residential property perceived better than

managed funds and equities• Consumer desire still strong for high

income returns

State of the adviser market

• Independent investment advisers: - Revenues down 30% - 40%

- Some just barely breaking even- Loss of confidence

• Insurance advisers:- All fine – little change

• Bank advisers:- Varies from bank to bank- Business good

Public awareness of planning

• Most recent awareness is negative• Public does not understand benefits of

quality comprehensive planning• Government has Retirement

Commissioner www.sorted.org.nz• Government about to spend money on

financial education

Key challenges

• Transition to regulation without losing too many advisers

• Rebuilding public confidence in advisers and fund managers

• Rebuilding adviser profitability• Transfering to new remuneration models

Questions?