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Philip Macalister
Philip Macalister
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Return expectations lowered

Wednesday 12th of May 1999

Should investment advisers be registered?

NZ First leader Winston Peters says yes.
To see what he says click here

Editorial:
 Why not police the providers of shonky products too?

What others say:
 Peters is right

Registration won't change a thing

It's a bad idea

Practice reviews required

Registration would weed out charlatans and bank tellers

Former IIAA president gives Peters some free advice

 Registration won't stop fraud

FPIA needs to pre-empt registration

Industry needs to be proactive

Time to dob in rogues

You too can have your say

Click here to send a letter to the editor
Investment returns for a number of key asset classes, particularly New Zealand equities and property, have weakened over the past three months.
Fund managers surveyed by Aon in its quarterly investment forecasts report, shows that managers have downgraded their return expectations for all asset classes, except cash.

Asset class

Expected average return over next 12 mths

Change from last quarter

Expected five year returns

Cash

4.8

+0.2

5.4

Fixed interest

5.2

-0.2

6.1

Property

7.8

-1.8

8.6

Equities

14.3

-3.8

11.4

Intl fixed int

5.0

N/C

6.0

Intl equities

7.6

-0.7

10.9

Inflation rate

1.6

N/C

1.8
The nine managers surveyed expected cash to return 4.8 per cent over the next 12 months, which is 0.2 per cent better than what was predicted three months ago.
The biggest downgrading has been for New Zealand equities. In this asset classes managers expect the sector to return 14.3 per cent over the next year, compared to an annual return of 17.1 per cent in January.
Likewise property return expectations have been lowered from 9.6 per cent to 7.8 per cent.
The survey also asks managers what they expect each asset class to return over the next five years.
New Zealand equities is the only sector where managers anticipate that the returns over the next 12 months will be higher than those predicted for the next five years.
Aon says wholesale funds have, in the 12 months to March 31, continued to generate high returns. It says the average return for this period has been in the vicinity of 11 per cent gross (7.5 per cent net).
The returns compare very favourably with cash returns of around 7 per cent gross and inflation of -0.1 per cent.
While international shares have produced a strong return in the past 12 months (MSCI up 17.2 per cent), only two managers actually earned more than the benchmark.
The average return was only 8.9 per cent and the range of returns was wide from -2.7 per cent for Spicers to 20.8 per cent for Armstrong Jones.

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Paul Flood: The danger is that the 'goalposts' (regarding what is acceptable or unacceptable adviser conduct) may be susceptible to change. Our 'Principles based' legal/regulatory environment lends itself to “prevalence-induced concept change” over time, perhaps not so much in the written laws and Code, as in the interpretation of the prescribed principles.
3 days ago Steve Wright
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Just a tip, if you use more than six, six letter words in a sentence you lose most Kiwi's. So avoid client/adviser confusion when writing your post or article if you would like it read and understood. Ironically, my last sentence was not likely read.
3 days ago Backstage
FMA outlines its latest expectations for advisers
All things said are great aspirational goals for a great financial advice industry, it mirrors what both the legislation and the code requires. However, like most things discussed it talks about what's expected not how it's done. The hardest aspect of financial advice today isn't what it is, it is how it is done. The how only comes from those that have done it, the how is only provided with examples. Guidance documents that spell out what's required along side how it it done. We’re still dealing with the same issues we started with in 2021, figuring out the how. And figuring out the how in every advice business is consuming resources that could easily be shortcut by the FMA demonstrating what they are expecting. It's not about “do it this way” its about this is the sorts of things we’re looking for. In the absence of standards and expectations, guesswork prevails. That represents significant risk to FAPs and the result is onerous overcooked advice processes for multiple advice operations and undercooked she’ll be right for single operators focused on getting the work done. Both approaches have potential for harm and as its been said earlier, leaves advisers open to explain they haven't been speeding with the authorities have pulled them over. The advice industry needs guidance on the how we know the what already.
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To correct errors in my previous post: "policies, templates, and controls" should read "policies, processes, systems and controls", and "is more conductive" should read "is more conducive".
5 days ago Paul Flood