Three Excellence in advice awards revealed

These awards look like a bit of a joke to me. I looked at Rival Wealth for example, which won a "Excellence in Advice" award from Financial Advice NZ, and in the disclosure statement they say "while I provide an impartial service I will only provide products that have been analysed to a level that makes the Rival Wealth Approve List". There are no index funds in the list of product providers which have distribution agreements with Rival Wealth and instead there are a range of high cost NZ funds, many of which have terribly high performance fees. I wonder if Mr Trevor Slater was aware of this and perhaps he would like to comment given that best practice amongst institutional investors, including our own NZ Super Fund, is to have at least a 50% exposure to bonds and equities via index funds.

Furthermore the NZ Super Fund makes much of its ability to minimise fees and even with big allocations to venture capital etc its average fees last year were 28 basis points versus my estimate of fees of the funds which Rival Wealth has "researched" at more than 150 basis points. That doesn't like "Excellence in Advice" to me relative to best practice.

Brent you are a broken record. Your myopic views on investment practices and advice have no basis in the reality of the outcomes achieved for clients by excellent practices like Rival. Any practice who has robust investment selection processes likes a DIMS licenced entity should be measured on results not a five minute review of their website. Your comments are designed to bring Financial Advice NZ in to disrepute and I have said before should be taken with a large pinch of salt.

Hi Barry

Thanks for your comments however these aren’t my views. I am just repeating what institutional investors all over the world say. So I guess what you are arguing is that institutions like the Super Fund, ACC, not to mention academics around the world, are wrong and a focus on minimising fee doesn't impact outcomes? Here are some examples;

• Paul Marsh of the London Business School said recently “if returns are relatively low and you are charging 1-1.5% on a fund you are probably gobbling up half of the expected returns. I don’t think this is sustainable.”
• The Chief Executive of the California State Teachers Retirement Fund said recently “the best way to get better returns is to reduce costs.”

What I have consistently said is that best practice as evidenced by the broad strategies that pension funds, with the benefit of independent trustees, inevitably includes minimising costs. On this basis Rival's fund manager selection doesn’t look "excellent". By the way I don’t think I need to make any comments to bring Financial Advice NZ in to disrepute as awards like this seem to do the job adequately.

What I'm stating is that there l is no direct correlation between the investment objectives of those organisations and individual retail investors portfolios. And to pass judgment on them without greater insight is potentially misleading in a public foutm.

Hi Barry

Let me explain; pension funds and the NZ Super Fund attempt to get the best return for their investors at a given level of risk, just like financial advisors should do for their clients. Ok? Once we get to that point we see that their investment objectives are similar to those of most retail investors. For example if you accept that the ERP is around 300 to 350 basis points then a 250-300 basis point all-up annual fee implicit in many wealth management solutions effectively offers, in respect of equities, the risk of equities with the return of bonds. So, given the above the statement by the Chief Executive of the California State Teachers retirement fund is relevant ie the best way to get better returns is to reduce costs.

The other way for a financial advisor to add value is to try to pick outperforming managers but as the SPIVA analysis shows that is hugely difficult given that outperformance doesn't persist and, as we have seen with many hedge funds and pension funds, that is problematic even for organisations with huge resources. Look at the Super Fund – they index virtually all of their global equity exposure ie about 70% of their assets. Once you accept what best practice looks like it is relatively easy to put clients' interests first.

By the way I know nothing about Rival and they may indeed do all these things – I just looked at their website and saw the institutions with whom they have "distribution agreements". It may be that they use index funds and it may be that they have low fee arrangements with the product providers however if they did I would have expected them to say so.

Regards
Brent Sheather

Although I share the same investment philosophy as Brent with an average TER of 30bps for my clients, I don’t see the point to rain on someone’s parade.

There were three awards given with the other two going to great young and relatively new members of our industry. This should be celebrated not condemned.

It would certainly be great to have all of your life experiences and knowledge the day we started our careers Brent but we don’t. And neither did you.

I don’t think Financial Advice NZ did a particularly good job of the awards but it’s early days. I’m sure the best is yet to come from this association that is only months old.

Put away your cane Brent and help educate the so called educators. You’re sounding more like the sour old spinster that kids would avoid coming home from school. Rather than someone with a lifetime of knowledge to share.

P.S. My apologies in advance to all sour old spinsters.

Phil
I think you should cease giving so much space to these personal tit for tat arguments.
It is very damaging to our industry We have suffered for years over some advisory firms building their success with mud slinging and public attacks on their rivals
lets hire a venue, get together and have a "fisty cuff" in private, get to a level playing field and on with the job !!!!

I believe these awards were recognition for 3 individuals for their wider contribution to service to clients and the industry as well as their innovative ways of raising standards in advice, rather than an endorsement by FANZ of their product recommendations. For that these individuals should be congratulated.

Leave it there Brent.

It is a matter for consumers, the advisers involved, and the market regulator to determine suitability of advice provided by them. Whatever products they happen to utilise are none of your (or my) concern unless they are doing something illegal or unethical, and I'd suggest that would be highly unlikely if they have been through both regulatory scrutiny and a peer review process such as these awards.

So rather than seek every opportunity for self promotion or self validation by comparison of your own philosophies against others which this blog continually permits, and which frankly IS damaging to public confidence in the sector and utterly inappropriate professionally in my view, you should just shut up Brent. This relentless attack upon all others in the industry who do not share your views are tiresome and bigoted.

Let's keep the story on point: congratulations to some younger advisers who are trying to positively change the shape of the advice industry and who have gone to exemplary lengths in the opinion of their peers to raise standards in service to community AND their customers.

Well done Tim, Camilla and Ryan. My message to you 3 is ignore the idiots and keep innovating. Congratulations to you all once again.

Hi Marie
Have you had an epiphany? Are you now
1. against free speech and the full and frank exchange of ideas?
2. in favour of, and actively encouraging violence?

Marie, I'm in! Book the venue.

A useful dialogue here initiated by Brent covering three differing concepts: 1. Industry awards, fees, and passive investment. For the purposes of clarity, let me provide perspective on each.

Industry awards: I tend to agree with Brent that gratuitous industry backslapping and awards events are both a waste of time and celebrate nothing more than industry participants doing their job. For this reason, I’ve never been a big fan of the various funds manager awards that raise their heads from time to time. Unlike Brent, I was present to hear about each of the recipients of the inaugural FANZ awards and learn about why these were in fact awarded. I learnt that each of these individuals has gone above and beyond what is required of them, to enhance the welfare of their clients and raise the awareness of what a good financial adviser can achieve for consumers. I learnt that each of these recipients are unique in their endeavours to promote the positive elements of financial advice, rather than dwelling on the negative. Perhaps Brent you could learn more about these individuals and their endeavours before casting dispersion.

Fees: Brent’s comments repeatedly confuse price with value, claiming that the industry cost can be significantly reduced. Whilst I agree that there are plenty of snouts in the trough, and that many industry participants won’t succeed without have a clear reason for their presence, I don’t agree that the provision of low-priced-mediocrity is the way forward. As with so many industries, the focus on price is usually the final argument when you are unable to justify your presence. I think that I’ve used this example in a previous response on this topic (so apologies for any repetition), but I’m sure that any individual requiring a medical specialist would gladly pay the fees for the best, if their future welfare depended on obtaining robust and reliable advice. If I was being cynical, it could be argued that the emphasis from some on low manufacturing fees, is really a mechanism to quarantine and protect their own significant advice fees.

Passive investing: Again, I feel like we’re visiting an old discussion here, where Brent has continued to liken the investment objectives and philosophies of larger institutional investors with those of individual consumers. This is an apples / oranges discussion, whereby many of the institutional approaches to investment are simply not relevant for individuals. And whilst we can all find academic articles to support any argument, the reality is that there is no secret sauce to investment – with both active & passive approaches being equally relevant. Let me explain further; if an adviser is unable to discover meaningful alpha from a market, then a low-cost beta approach is very relevant (ie: larger cap US stocks). The way the world is travelling, the cost for this approach is rapidly trending towards zero. With in excess of 29,000 active investment capabilities currently available to Australasian investors, the job of sifting through the options is getting harder – with the majority of products simply failing to deliver. But that’s not to say that all active solutions are the same, with a bit of research discovering repeatable and predictable active approaches to investing. These capabilities cost more than passive options and need to be added as appropriate exposures within the overall portfolio risk and fee budgets.

Whilst I’m a fan of open and honest discussion on all topics, these need to be balanced – and dare I say researched – before projected. A little bit of knowledge is very dangerous in the wrong hands.