[The Wrap] The year that was - and what may happen next year

Here are some thoughts on the year that has been, but also a few predictions for 2025. Feel free to comment.

Saturday, December 21st 2024, 2:13PM

Sitting at the beach recovering from a reasonably big operation I thought it was a good time to reflect on the year that was and do a bit of crystal gazing.

I’m often asked about the state of the financial advice sector. My response is that it has changed significantly since the regulatory regime fully came into force in March last year.

Many, many advisers have left for all sorts of reasons. The exit has been a bit of an exodus. But on the flip side most of this exodus has been filled by new advisers coming into the industry.

A story we wrote a couple of months ago had the net loss as a couple of hundred advisers. There are pros and cons to this - of course.

The pros are we have a younger, more diverse adviser population. The biggest con is the loss of experience.

The question, which I can’t answer, is will the quality of advice change and will it become more tick box exercise? I hope not.

This leads into the Financial Markets Authority. Its team of, what I am told are rather young, inspectors have been conducting monitoring visits of Financial Advice Providers from the big ones like NZ Financial Services Group down to one or two person firms.

I was rather stunned researching some of these individuals and their previous jobs. How young people with no financial advice experience can be judging advisers who have been in the role for decades is beyond me.

Anyway, we will have more on these visits, from an adviser’s perspective, early in the New Year.

Based on what the regulator has said, financial advice is in pretty good shape.

When it comes to other parts of the FMA there appears to be a a growing groundswell of comments that are not particularly positive

It’s interesting the FMA was championing the court cases it took against various insurance companies and how much money had been paid back to customers.

One of the ironic things is that most of these companies self-reported the breaches then get named and shamed and fined millions of dollars.

As this is self-reporting it’s hardly a victory the regulator can claim.

What this does highlight, and we don’t hear enough about it although it significant, is that many of the insurance and fund management firms suffer IT issues, particularly with legacy systems.

These are a devil of a thing to fix from what we are told.

Finally on the regulator, one thing is clear and that is that the FMA is a very different organisation under the current leadership compared to the previous one.

This year we got the second ever chief executive of Financial Advice NZ plus the arrival of a new mortgage adviser focussed association.

It’s interesting as Financial Advice NZ is heading in a new direction under Nick Hake’s leadership.

The line up at their conference next year shows where things are heading.

Don’t be surprised if we see more focus on the CFP and CLU designations and maybe the end of the association’s own Trusted Adviser marque.

In an opinion piece when Katrina Shanks announced her resignation, I opined it was a make or break time for Financial Advice NZ and it had to make the right appointment for the CEO role.

We have seen in the past how getting the boss of an industry association right is make or break.

The board made a good appointment and Financial Advice NZ will evolve into a more important industry body.

The new mortgage adviser association, FAMNZ, is still in its infancy. How it evolves is something to watch.

It seems there are more funds under the Christmas tree than ever at the moment.

My hunch is that in 2025 many more fund managers will be looking to the adviser channel for growth.

One of my observations is that the number of Australian fund managers playing in the New Zealand market is growing at a rapid clip.

What’s more they are showing a true commitment by launching PIE versions of their funds. This isn’t a cheap exercise and I am told they need to get something like $150-$200 million funds under management just to break even with their PIE funds.

My enquiries show that Australian managers have pulled billions of dollars out of the New Zealand market. Quantifying the number is pretty difficult, but it is big.

The Australian managers are interesting as many of them are bringing quite different investment strategies for advisers to consider in their portfolio construction. There are lots of differentiated fixed income funds; think of Coolabah and Daintree as examples; there is private credit such as Metrics and next year we will see an Emerging Markets fund launched.

In New Zealand don’t be surprised to see consolidation. Castle Point was sold during the year; Investment Services Group (Devon, Select Wealth etc) was shopped around the market and others could well follow.

Don’t be surprised to see more global players in the New Zealand market. Blackrock is playing an ever increasing role in New Zealand. There is certainly some debate about the merits of its increasing reach. A couple of days ago TA Associates took a “strategic” 50% stake in Craigs Investment Partners.

Over on the life insurance side Resolution Life (the old AMP Life) was taken over by Nippon Life.

Who will be next?

Tags: Opinion