Fisher Funds: Industry should pull together

Bruce McLachlan has recently taken over as the Chief Executive of Fisher Funds Management, coming into the role from the Co-Operative Bank.

Tuesday, October 31st 2017, 11:42AM

How have you found the difference in funds management, coming from a background in the lending space?

It is a different industry, but having been involved in investment - and KiwiSaver in particular - for a big part of my banking life, it’s actually a pretty easy transition.

Is the change in leadership going to change the business quite a bit?

That’s all ahead of us. The reason the shareholding changes happened is because the business is positioned so well, and the existing shareholders were very keen to expand their shareholding. They’ve brought in TA Associates, who are very keen to get a significant stake in the New Zealand market. Both of them are really committed to the organisation’s future as a strong growth prospect. It’s an exciting time for us.

Don’t TA Associates have an ownership in Russell Investments?

They do. They own 50% of that business. They actually have stakes in 19 fund management businesses around the world, as well as many other industries. They specialise in five industries, of which funds management is one. However, this is their first stake of any business directly in New Zealand. They own another funds management firm in Australia, Yarra Capital.

Will they bring more expertise to the organisation from an international perspective?

What we’ve got is the best of both worlds. We’ve got a stable, New Zealand-based, long-term shareholder in TSB Community Trust, combined with international best practice. It’s a brilliant model for us.

Will you be doing much more work with bank distribution now?

The way the Community Trust structure works now is that it’s not the bank driving it, it’s the Community Trust that’s driving it. We are a subsidiary of their commercial enterprise, just as TSB Bank is. There is actually no direct connection, but we have one common director. They are the distribution source for us now and we see that strengthening and expanding over time, but beyond that, we are two quite separate entities.

One of the issues that keeps coming up in regards to KiwiSaver is contribution rates and people getting involved…

Don’t get me started! How long have you got?!

Why do you think these non-contribution rates are so high? More importantly, what can we do to fix that?

I’ve just had two days in Australia visiting a whole raft of super providers over there. I have to say, if you look at all their promotional material, all of them are saying that the current, compulsory 9.5% is not enough. You’ve got to be saving more and more. When you look at what they are doing over there to actively engage the population around their need for retirement savings, and then you look at what we’re doing, there is a wide chasm. For us, it’s not just about the 40% who are not contributing. I think that at least as big a problem is that there are literally millions who are contributing who think they have their retirement sorted, but they haven’t. Thinking that 3% - plus 3% from your employer - is enough is just wrong. We are just so far short of what we need to do to help New Zealanders have a retirement that they deserve.

Whose role is that?

I reckon it’s everyone. It’s probably one of the things that annoys me. We often look to the government for these things, and the government does have a role to play, but so does the industry and so does the media. It’s a crying need of New Zealanders and I just don’t see it. We’ve all got a job to do there. We would be stronger collectively. At the moment, it’s all piecemeal.

Do people in the financial services industry need to work together more?

Yeah, we do. I have a history in banks, and banks are not necessarily loved by everyone, but one thing that banks have really sorted out is what I call “the line”. They compete like crazy on one side of the line, and then they work together when it’s in the nation or industry’s best interest. They work together very well. That’s a dynamic I don’t see in investment markets and funds management. It’s a missing gap and I’ve been talking about this with quite a few people.

Does there need to be more of a KiwiSaver-based lobby group?

I don’t have the answer to that yet. One of the reasons I went to the FSC conference is that I’m wanting to engage with more and more people, and get a better appreciation, myself, of how the industry is structured, and build my own view on how this can come together. It’s not right at the moment – that’s the only conclusion I’ve made. We’ve got to push quite hard here, because every year that we’re not doing this, matters, big-time. We’re already at least 10 years behind Australia. The bulge in the population reaching retirement is so close. We’ve got to be doing something, quickly.

Where do you see Fisher Funds sitting in the future, when it comes to engaging with financial advisers?

What Carmel [Fisher] did, with a brilliant strategy, was recognise that KiwiSaver is the future. Through brilliant acquisitions, she got a strategic stake in that market. In the last three to four years, they’ve been really focused on integrating those businesses. The focus hasn’t been on new distribution, it’s been on actually bedding down the 270,000 clients that we’ve got. You can absolutely understand why that was the right strategy. That’s largely done now, so I think that, particularly with the new shareholding, there’s now an opportunity to look more broadly at our distribution again. There are gaps in our distribution across the board, of which third-party advisers is one. We do have a network of ex-Tower advisers, called DNA Advice, and we’re in the process of reconnecting with them. We see that as a prospect. I do see that there is an opportunity for us to really grow our connection with selective adviser forces more broadly. I don’t see an interest in our business trying to go to the third-party advisers in their entirety, but I do see selective prospects where we can get stronger partnership-type arrangements, to capitalise on that.

Carmel sort of doubled down on KiwiSaver…

Then doubled down again!

We don’t hear so much about the other aspects of the business, besides KiwiSaver, though?

We do manage fund investments, we do KiwiSaver. It is actually a reasonably straightforward business. I actually think people try to make this whole area too complex. It doesn’t need to be complex. 80%-90% of client needs can be easily identified and serviced within a relatively limited product range. You can go wider, but that doesn’t always necessarily meet a client’s need any better. Getting more focused on clients is the future.

Tags: banks Fisher Funds FSC funds management investment KiwiSaver retirement Russell Investments TSB