The exit of Peter Neilson from the Financial Services Council (FSC) has sidelined proposals to create a unified industry body.
Following the departure of Neilson – made redundant over a week ago – the FSC launched a full strategic review, putting merger talks with employer superannuation and KiwiSaver organisation, Workplace Savings NZ (WSNZ), in jeopardy.
WSNZ had been negotiating with FSC to form a combined industry body for several months, extending the tenure of outgoing chief, Bruce Kerr, in part due to the uncertainty surrounding the scope of his replacement’s role.
However, Rob Flanagan, FSC chair, said while WSNZ “could fit nicely” within the organisation, any potential merger would have to wait for the results of the review.
“Absolutely, it makes sense to have a unified industry body,” Flanagan said. “But until we work out what we’re doing, it’s a little premature to consider a merger [with WSNZ]. We have to get our structure right first, and develop a clear view of our purpose.”
He said the FSC review would probably take at least two months.
Meanwhile, WSNZ would push ahead with recruiting a new CEO, according to the industry body chair, Kerry Haycock.
Haycock said with Kerr due finish his period of extra time at the top by the end of March, WSNZ had put the job “back in the market”.
He said while Kerr operated in a part-time capacity (20 hours a week), the role could be upgraded to full-time for his replacement.
“We’re being flexible on the hours,” Haycock said. “But being a full-time opportunity the position might attract a slightly different range of candidates.”
However, given the diverging timelines of the two industry bodies, the advertised role could not take account of any potential merger with the FSC.
“We’ve been in open dialogue with the FSC for the last couple of months – and that dialogue is still open,” Haycock said. “But right now, the FSC is focusing on its issues. We’re focusing on finding a replacement for Bruce.”
Commission for Financial Capability (CFFC) head of investor education and WSNZ councillor, David Boyle, said a joint FSC/WSNZ would be good for the industry.
In his capacity as a long-time WSNZ councillor, Boyle said a merger of the two associations would provide a strong platform for lobbying government, providing “thought leadership” and solving practical industry issues.
“There’s a wonderful opportunity to create a new organisation that captures the best elements of both the FSC and Workplace Savings,” he said.
According to Boyle, any combined financial services industry body should also incorporate insurers.
A raft of life insurance firms – including Fidelity Life, AIA, Asteron, and Partners Life – resigned the FSC last year in the wake of a report critical of current life insurance remuneration practices. The FSC-initiated Melville Jessup Weaver (MJW) report called for restrictions on life insurance commissions similar to those recently introduced in Australia.
Prior to the MJW report, AMP and the ASB-owned insurance firm, Sovereign, also resigned the FSC.
A group of life insurance firms were considering forming a new industry body.
Boyle said insurers should bear in mind that the current Financial Advisers Act review could change conditions for both insurance and investment firms, creating more common ground across both industries.
“Insurance providers are making decisions based on today but [post FAA review] there could be some big changes,” he said. “Now’s a good time – irrespective of what’s happened in the past – to create a comprehensive financial services association.”
Flanagan said the disaffected insurance firm members may reconsider their positions following the FSC self-review process.
“Technically, only one member has actually resigned the FSC,” he said. “The others have only given 12 months notice to resign [as required under FSC rules promulgated late in 2014].”
Flanagan said the resignation rule “anomaly” – designed to protect FSC finances – had created a situation where “no-one wants to be the last man standing”.
“We hope the [resigned] insurance members will come back following the review,” he said.
The FSC has formed a sub-committee to conduct the review, which should be presented to the board within a couple of months, Flanagan said.