New Zealand News – Compulsory retirement savings gains ground

Support for a compulsory retirement savings system in New Zealand continues to gain ground according to the latest SaverPulse survey.

Head of the Investment Savings and Insurance Association (ISI), Vance Arkinstall, says results for the March quarter show more than 60 per cent of New Zealanders favour some form of compulsory superannuation, up almost 5 per cent from the previous quarter.

"This is the seventh successive quarter we have seen this statistic increase. This result mirrors a similar response to surveys in Australia," Arkinstall says.

He says research conducted by the Australian Superannuation Funds Association (ASFA) indicates that Australians show an increasing appreciation of their compulsory super environment.

"Some ASFA surveys have shown a larger number of Australians continue to support compulsory super or even want it extended. There seems to be a fear amongst some Australians that people are not saving enough," Arkinstall says.

Other results from the SaverPulse survey indicate New Zealanders are definitely not saving enough. The proportion of people who are saving for retirement fell from 58 per cent to 54 per cent in the March quarter.

Arkinstall says that while it is too early to judge the significance of this drop it will cause more concern if the trend continues into the next quarter.

"One of the worrying key points to emerge from this quarter's SaverPulse survey results is that people are becoming less entrenched in their savings habits. Twelve months ago 21 per cent of those who had the ability to save had not started. This has now increased to 24 per cent," Arkinstall says.

He says the proportion of those who describe themselves as entrenched savers has also dropped significantly from 70 per cent to 61 per cent over the past year.

"This is a cause of concern to the industry and should be a signal to Government on the need for immediate action to support savings."

Sterling Grace acquires majority stake in Spicers

Spicers Portfolio Management is on the lookout for global opportunities following the move by US based investment firm, Sterling Grace, to take a controlling interest in Spicers, increasing its shareholding from 49 to 65 per cent.

Spicers chief Craig Dawson together with company director, George Kerr, own most of the remaining 35 per cent of the firm.

Dawson says the injection of capital by Sterling Grace will enable the company to expand into lucrative markets in the UK, Australia and possibly the US.

"The key to Spicers' success in New Zealand has been the integrated model of the funds management side and financial advice parts of the business, which was created from a financial planning distribution company," Dawson says.

"We would like to create a similar structure in these countries and want to acquire distribution firms there as soon as possible."

He says no purchases have been made to date but Spicers has been assessing possibilities for several months.

Spicers' relationship with Sterling Grace, Dawson says, is a "true partnership" as both parties retain a financial interest and have complementary areas of expertise.

"Sterling Grace has a truly global vision and look for opportunities everywhere. George Kerr and I will be able to investigate these further using our specialist knowledge," Dawson says.

"We want to develop Spicers and we're much better placed to do that with a global partner."

He says that while there has been a lot of international interest in the Australian financial services market recently, better opportunities may lie in the UK.

"We're looking at both Australia and the UK as they are the markets most similar to New Zealand. The UK market, though, is more fragmented and offers more potential," Dawson says.

At the same time Spicers has signalled an intent to expand the New Zealand market further with the repurchase of the six largest Spicers franchises in the country.

Dawson says franchising worked well in the early stages of business development but consolidation now would enable greater effort to be put into expanding market share.

He says the potential for growth in the local funds management industry remains strong as most New Zealanders still have to be convinced of the value of managed funds.

"It's a constant challenge but also very lucrative. There's plenty of room to grow as fund managers are not fighting each other but going after bank deposits and residential property investors," Dawson says.

"The tide will inevitably turn towards managed funds in New Zealand as it has all over the world."

Enhanced self-regulation better value than licence

An enhanced self-regulation of the financial planning industry may provide better value to the community than a licensing or registration scheme according to John Farrell, head of the Securities Commission.

A scheme to register all financial planners has recently been floated as a possibility by the New Zealand First Party to counter the widescale corruption it claims exists in the industry.

Reaction from industry bodies to this proposal has been lukewarm.

Farrell says legislation to provide more teeth to the appropriate financial planning body might provide a better basis for a more professional public perception of the planning industry.

"The initial reaction of industry players to this idea has been positive and they've gone away to think more about it," Farrell says.

He says the industry will probably require more discussions with the Securities Commission before any firm proposals are put to the Government.

"The industry, and the Securities Commission, should do something sensible and well thought out. We have to think through things carefully if we're going to spend tax-payer dollars," Farrell says.

He says that before the Securities Commission gives accreditation to a body such as the Financial Planners and Investment Advisers Association (FPIA), the association will have to prove several things.

"It would have to have a good public standing, a clear set of rules, procedures to enforce those rules and an open membership," Farrell says.

Once given approval by the Securities Commission, the members of the appropriate organisation will then be able promote themselves as official financial planners with legislative backing.

"It would be much like the arrangement for chartered accountants, where to call yourself a chartered accountant you must be a member of the Institute of Chartered Accountants," Farrell says.

He says if people then choose to invest with financial planners who are not members of the approved organisation they must shoulder the fault themselves if their investments fail.