Regulation helps advisers battle banks

Regulation allied to relationships presents the adviser market with a number of key opportunities to take on their main rivals – the banks.

Tuesday, May 31st 2011, 7:05AM 4 Comments

Fidelity Life chief executive Milton Jennings says that advisers - especially those with AFA status - are in a unique position as they are not only able to build long term relationships with clients, but they can specialise and tailor their services to clients needs in a way the banks are unable to.

He told delegates at the Life Brokers Association conference that in his 25 years in financial services, the most successful advisers he has come across had been specialists, targeting specific clients' and their needs.

"If you can narrow the focus you can really dominate that position," he said.

He also said that while bank staff can advise on certain products under QFE rules, AFAs and their ability to form closer client relationships presented a great opportunity for advisers.

"You've got 1.7 million KiwiSaver members that can only be serviced by that market [AFAs]. It creates enormous opportunity."

He said banks don't have the same level of commitment to relationships that good advisers have, and that the better bank advisers often quit to go it alone in the advice market.

"Relationships are key, it's a people business," he said.

"We think people do business with people, insurance is sold not bought."

Jennings says Fidelity is focused on helping advisers as they are the company's sole sales channel.

"If we're only dealing with advisers, keeping them strong keeps us strong," he said.

Jennings said that relationships were the key strength advisers had and that the new adviser regulation, in particular the creation of AFAs, "is going to set you aside."

"The key for us is relationships, we want to be the company of choice for advisers."

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Comments from our readers

On 31 May 2011 at 7:44 am Independent Observer said:

I also once thought that banks simply flogged product over-the-counter (and to a certain extent they still do).

However it is worth looking at their HNW/private wealth teams, who provide bespoke advice and develop deep relationships.

I wouldn't be dismissing banks with 'anti-relationship' abilities just yet.

On 31 May 2011 at 9:48 am Bazza said:

IO I agree with your comments about the HNW/Private banking services, but there are alot of New Zealanders whom will never qualify for HNW/Private banking support, but still need great advice. I think they deserve great independent advice infact, so I agree with Milton that the opportunity for advice businesses who can get their ducks in a row is huge.

On 31 May 2011 at 11:43 am Kieran said:

What Milton seems to miss is that there are an aweful lot of bank advisers who have gone through AFA training. In fact I note that the first Kiwibank advisers now their AFA's and those guys don't deal exclusively with Private bank clients. Also Westpac has put all its Wealth Advisers, Private Advisers (i.e the day to day banking guys) and even some of the Institutional Banking guys through AFA. I suspect that going forward having AFA isn't going to be the golden ticket Milton describes, but rather the minimum need to simply keep up. Anyone not going for AFA (i.e RFA's) are going to find themselves left behind.

On 1 June 2011 at 8:24 am JD said:

Looks like Milton is stuck somewhere in the 90's. AFA is not an opportunity, but a minimum standard - sadly something that has been lacking in this country. Attaining AFA is not onerous and should not be aspired to. When you have an industry full of AFAs, I'm not sure where the advantage is.
Another missed point is that the reason why banks don't specialise is because they don't have to. The major banks are currently spending large budgets to get ready for FAA regulation and to position themselves to take advantage of it. I doubt the little guy with a shingle outside his door has the same resources.
What regulation will likely do is push smaller adivsory businesses down the dealer group path. In exchange for a cut of their revenue, advisers will need to comply with the dealers processes and product range.
Still, if it gives Milton and his porch jockies comfort to dream away, then perhaps we should allow them that little indulgence in the winter years of their professional lives.