Attitudes to advice cost must change
New Zealanders will need an attitude change to accept they will have to pay for financial advice as part of safe decumulation, Auckland University researchers say.
Monday, August 3rd 2015, 6:00AM 
2 Comments
by Susan Edmunds
The Retirement Policy and Research Centre has released a working paper: "Options for dis-saving safely."
It says many middle-income retirees are ill-prepared to manage lump sums and are unable or unwilling to acquire the skills and knowledge necessary to manage their assets.
This is likely to become more of a concern as New Zealanders invested in KiwiSaver accumulate larger balances.
The Centre says a particular flaw of KiwiSaver is the absence of any consideration of the decumulation phase of an investor's life cycle. Most people self-manage their retirement income and there are few tools available to help them.
"To self-manage retirement savings, for some people, is a bit like having a pile of car parts and a technical manual dumped in your driveway when you wanted to buy a new car,” the paper says.
“Even with promotion of financial literacy, and online budget tools, it is an unrealistic task for most people to acquire sufficient financial expertise to manage all the investment steps needed to get to their pension goals, and then to manage the distribution of their assets or decumulation over the three phases of retirement.”
It says there is not yet a culture of paying for advice on decumulation, "perhaps reflecting the lack of available products".
The Centre suggests there should be access to approved, independent financial guidance at suitable moments during retirement, with consideration given to whether that should be a default setting for KiwiSavers with significant balances.
Centre research fellow Claire Dale said Kiwis' attitudes to advice would need to change. "It's a shift we need to make in New Zealand to acknowledge that there will be a cost for that advice. But that cost wouldn't be that exorbitant, either."
She said if it cost $1000 to set up a system that would serve an investor for the next 40 years of their life, that should be seen as a good investment. "I'd rather pay than have the financial adviser relying solely on commission."
But she said the biggest problem for financial advisers was that there were insufficient products available to help them.
She said the Government should develop retirement income products to help New Zealanders decumulate, such as a gender-neutral annuity product with a 10-year guarantee.
But she said annuitisation should not be made compulsory in New Zealand.
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Would someone please tell the CFFC and the FMA?
As I read the comments about Kiwi's attitudes to advice needing to change I can't help thinking of FMA and CFFC's (formerly CFLRI) attitudes.
David Kneebone needs the sack.
His comments to potential and existing savers, investors or buyers of insurance consistently overlooks opportunities to promote the use of advisers. His generic, bland and impersonal advice is well-meaning but ultimately futile. It's the technical manual mentioned in the story above. Kneebone has shown he cannot get past his own attitude/bias against advisers. He does not trust us.
The FMA need a kick too. Past comments by Elaine Campbell (now at AMP) and Kirsty Campbell (current head of Supervision) have done nothing to support the difference good financial advice can make - check out the "consumer" section of the FMA website!
The recently published 'Investor Capability Strategy' (download here: http://fma.govt.nz/assets/Reports/150703-Investor-Capability-Strategy-2015-2018.pdf ) mentions the word "adviser" 6 times:4 of those negative, one identifies the 5% of investors who are "habitual" and likely to already use an adviser and one which envisages the ways in which advisers might improve.
-Low trust of advisers
-Advisers may not have
skills to address investor
cultural needs
-May not use a financial adviser x2
-Likely to use an adviser
-Advisers and providers are more consistently describing
and helping investors address investment risk
No plans to encourage the use of advisers then.
Gee, thanks.
Guess we're all still cowboys eh?
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Unfortunately in NZ, there are still plenty of ordinary investment gateways, that charge a healthy price in exchange for mediocrity (or worse)