FSC must fix its own ructions before it can fix industry

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There probably aren't many people who would want to be in the Financial Services Council's shoes right now.

Wednesday, November 4th 2015, 12:00PM 2 Comments

by Susan Edmunds

The industry body is the representative of insurers and banks in New Zealand. But it is struggling with internal division, relevancy and against its own financial situation.

In theory, now should be its time to shine.

The Financial Advisers Act is a chance for it to really make its mark and drive changes desired by the big end of town.

But instead the FSC seems to be struggling to keep its house in order.

It has been spending on things that it does not have the revenue for, perhaps partly due to a board used to operating with a bit more money at their disposal.

There were some one-off costs, such as redundancy payments and a lease break fee associated with the closure of its Wellington offices at the end of last year.

But this seems to be something that has been brewing for a while - it is understood that there was some disquiet in the FSC ranks previously about hundreds of thousands of dollars spent on a KiwiSaver report, and reportedly half a million on its much-whispered about Melville Jessup Weaver report into industry churn.

The financial mire prompted FSC to change its rules recently Instead of requiring three months' notice from those wanting to resign, it now wants 12.

That is so that if things really turn to custard and all the members jump ship, the last one left at the table isn't handed the bill.

But AMP and Sovereign have reportedly given their notice. Neilson says it's a formality and just giving them the option to leave at the end of the 12-month period but industry sources disagree.

Without AMP and Sovereign, FSC has a much harder job to claim it is an industry representative.

Some sources say things got a lot tougher for the FSC after it decided to ditch its Wellington presence. Neilson has a strong political background but even that is not enough to make up for the fact that not being in Wellington can make it harder to have an impact on Government.

There are industry concerns that the FSC isn't taken seriously enough by politicians. Some big players have taken the decision that lobbying on their own can be more effective than pooling resources with the FSC.

That has left FSC doing the sort of work that has felt a bit like tinkering around the edges - promoting income protection insurance and criticising a Treasury report into KiwiSaver.

The departure of former Prime Minister Jenny Shipley from the position of chair won't have helped.

Neilson has the unenviable task of trying to unite a diverse group of industry players - something that has been made clear with the MJW report experience.

Media were told the report was being done but months later no one but the FSC board has officially seen even the draft - it is believed to have been sent back to MJW for more work. 

When some FSC members have strongly criticised the level of commission and replacement business practices in insurance and others have steadfastly stood by the new status quo, that is perhaps unsurprising. Some have wondered whether the report will ever be finalised.

The FSC has a valuable role to play in New Zealand's industry but it needs to get beyond these internal divisions – or the impression of them – to be able to do it to its full potential.

Tags: FSC

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