Fidelity Life reduces KiwiSaver adviser force by 90%

Fidelity Life has reduced its KiwiSaver advice force by 90%, citing new AFA regulations for the dramatic reduction.

Wednesday, January 26th 2011, 5:00AM 4 Comments

by Benn Bathgate

Fidelity chief executive Milton Jennings said the majority of advisers made their own decision to quit as "it doesn't make sense to spend $7,000 or $8,000 to sell KiwiSaver."

"They'll make more money giving advice on risk."

He said the low cost nature of the product meant there was little money to be made for advisers who faced what he described as a "double hit" from the new regulation.

Not only did they have to pay to sit the exams, but the time commitment reduced time they could be earning.

Jennings said Fidelity terminated any adviser not looking to gain AFA status.

"We had two to three hundred advisers selling our KiwiSaver product and that number is now down to between 20 and 30. The volume of new business has certainly reduced," he said.

Jennings also cited competition from banks able to capitalise on greater brand recognition.

Problems of customer churn were also highlighted as KiwiSaver regulations place the cost burden of transferring schemes onto the provider.

"They should put in some rules around it - some people are transferring two to three times a year. It's not good for the person doing it and it's not good for the providers."

However, he said the company's KiwiSaver funds were on course to hit the $200 million mark and that he saw a future in the investment side of KiwiSaver as balances begin to grow.

He also cited the departure of the likes of Asteron from investment management as a positive, as "gaps are opening up."

Benn Bathgate is a business reporter for ASSET and Good Returns, email story ideas to benn@goodreturns.co.nz

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Comments from our readers

On 26 January 2011 at 2:18 pm Tony Vidler said:

It is appropriate to clarify that the "Kiwisaver adviser force" referred to in the article does not refer to the independent (sorry, "non-aligned") financial advisers that are the mainstay of the industry.

Fidelity had dealt with some distribution groups previously that employed large salesforces dedicated to selling Kiwisaver alone. Those businesses were transactional in nature, and essentially volume based. In light of the obligations for advisers in a more regulated world those business models no longer made sense in the long term.

Fidelity remains committed to distributing its products via competent and professional financial advisers, who retain their business independence.

On 26 January 2011 at 6:44 pm Murray Chong said:

I am lucky to be one of the 20-30 Kiwisaver advisers that Fidelity have chosen to hold on to.

I am also concerned about the amount of Kiwisaver churning that is going on at the moment.

I feel it is because advisers that have no intention of becoming an AFA currently can still sell Kiwisaver to their clients, they hopefully want to be the last person to churn this client before their time runs out.
These Advisers will still be getting the trail from this, however in the future they will not be able to assist there clients with Kiwisaver advice.
Clients should be currently informed that an adviser that sells them Kiwisaver who has no intention to be an AFA would not be able to give them full advice service in the near future, however they will still be paid a trail.

This is currently a problem that needs to be addressed, as these clients will not be getting the sevice expected from this adviser.

It is good to see that Fidelity has taken action to try and stop this happening.

Hopefully other providers follow suit with their own sales force.

On 27 January 2011 at 8:07 am Colin said:

Fidelity used non-sustainable, targeted sellings programs to bolster KiwiSaver sales. Now 90% of the KiwiSaver sales force is gone and Fidelity is left with the juicy membership, growing FUM, higher future profits and possibly lower or no 'trails'. Sounds like a certain group of people got used here.

On 28 January 2011 at 8:27 am Anon said:

I think you'll find that a very large % of accounts sold by these sales forces are minimum value, no contribution. The prospect of significant FUM growth will prove to be an illusion.