John Brogden

Sustainability and increased consumerism are at the heart of the changes taking place in the life insurance industry, John Brogden CEO of the Financial Services Council said yesterday.

“The FSC is taking a lead in how the industry is responding to these issues,” Mr Brogden told delegates at the opening of the fifth annual FSC Life Conference in Sydney.

“We engaged Milliman consultants to conduct research on the sustainability of the life industry with a particular emphasis on the retail and group markets,” he said.

The research categorised issues for the life insurance industry into three key areas of:

• Market – for  individual companies to address;
• Industry  − may require an industry response and would benefit from an industry-coordinated approach, but do not involve competition; and
• Regulatory − areas where regulatory intervention may be required by government.

Mr Brogden emphasised that the FSC and its members were strongly of the view that challenges driven by market factors should be left to the market to resolve.

“However, there is a role for the FSC in coordinating and leading responses to industry-wide issues and in advocating for regulatory and legislative reforms,” he said.

The FSC is advocating for proactive legislative changes.

The first will be to introduce a ‘statute of limitations’ on group insurance disability claims to help the industry manage pricing with more certainty and to ensure the long term sustainability of premiums. The second will be to change the Private Health Insurance Act so insurers can fund medical treatment for claimants to improve return to work rates.

“This is an important change which will deliver better outcomes for claimants and will help to manage increasing claims costs for insurers,” Mr Brogden said.

“It will also help to improve the welfare of individuals by allowing them to remain engaged in the workforce and ultimately contribute to economic growth through higher labour force participation.”

The FSC is leading the response to non-regulatory issues that must be dealt with by the industry/ These include:

• Improving the quality and consistency of data shared by the industry, particularly for group insurance;
• Considering an industry fraud bureau similar to that used by  the general insurance industry and in other countries such as Canada and South Korea; and
• Establishing a medical impairment bureau.

Mr Brogden also said financial services industry can increase its already significant role in supporting the sustainability of the Federal Budget.

“Life insurance needs to be seen in the context of its capacity to reduce government outlays,” he said.

“Underinsurance has a significant impact on the Federal Budget as many of those with insufficient insurance ultimately draw on the government through various pensions.”

“The potential for life insurance to reduce welfare costs has not been considered.”

The FSC is examining how the industry can help reduce the future costs of the National Disability Insurance Scheme and the Disability Support Pension to the government.

“Life insurance can be the private sector solution to the increasing budget costs of welfare just as superannuation is the private sector solution to the costs of an ageing population and private health insurance is a private sector solution to managing health care cost.

Mr Brogden said the FSC’s Financial System Inquiry submission will include modelling by Deloitte on the potential benefit of privatising some elements of the NDIS and DSP to the Federal Budget.

The post FSC Annual Life Insurance Conference 2014 − Sustainability and consumers are at the heart of life industry changes appeared first on AdviserVoice.

Don Hamson

Plato is working with Milliman to overcome the problems of sequencing and longevity risk by developing risk management strategies that will aim to enable investors to maintain higher weightings in growth assets whilst providing tail risk management in times of financial crises like the global financial crisis (“GFC”).

The GFC highlighted the limitations of traditional balanced funds. As a response many superannuation funds are developing “lifecycle” strategies which progressively de-risk investments as members approach retirement. Unfortunately for many superannuants, reducing sequencing risk in this way simply increases longevity risk, and investment projections show that fund members and investors cannot afford to accept the lower returns associated with less risky portfolios

“The issues that impact retirees and how they should invest are substantially different from those of investors focused on the accumulation of wealth. Our focus on after tax investment approaches was the first step in acknowledging these issues.” said Dr Don Hamson, Founder & Managing Director of Plato Investment Management.

“Over the last couple of years, we have focused our research efforts on the impact that sequencing risk can have on retiree portfolios and potential solutions to this problem. This has been in direct response to our clients who have been disappointed with the poor returns offered by cash and fixed income, but who are still haunted by the GFC when it comes to investing in equity markets. Through our work with Milliman, we intend to provide our clients with access to an institutional quality risk management platform and approach that services some of the largest organisations around the globe.” said Dr Hamson.

Wade Matterson, Practice Leader of Milliman said, “We are excited to be working with Plato to help address these issues for their clients. Retirees are faced with a risk tolerance paradox where they need to simultaneously invest for growth, but have to be insulated from market events and financial crises.

Combining a growth oriented investment strategy with the management of volatility and equity market risk via the Milliman Managed Risk Strategy (MMRS) provides the opportunity to invest in a more sustainable way given the ever increasing length of retirement and the need to maintain purchasing power over time.”

“By delivering the MMRS as an overlay to Plato’s existing fund, advisers and their clients will gain access to a best of breed risk management methodology applied to Plato’s proven equity investment approach.” said Mr Matterson.

“This is a first for the Australian market and further illustrates our focus on the development of innovative investment approaches for retirees.” added Dr Hamson. “Milliman is a global market leader when it comes to managing market risk for its clients.”

The post Plato engages Milliman to offer award-winning equity income strategy with risk management overlay appeared first on AdviserVoice.

Lukasz de Pourbaix

Investment research house Lonsec Research Pty Ltd (Lonsec) and global actuarial and consulting firm Milliman yesterday  announced that Telstra Super Financial Planning (a wholly-owned subsidiary of Telstra Super), has become the first financial services group to sign up to Lonsec Retire, a collaboration between Lonsec and Milliman that provides financial advisers with access to contemporary investment strategies to help them meet the investment needs of retirees.

The post Telstra Super joins Lonsec & Milliman retirement network appeared first on AdviserVoice.

Lonsec and Milliman form panel to assist advisers.

Investment research house Lonsec Research (Lonsec) together with global actuarial and consulting firm Milliman have formed an industry panel consisting of six financial product providers to assist financial planners navigate through the complex issues relating to investing in retirement.

BT Investment Management, Colonial First State, Macquarie, Metlife, MLC and Plato Investment Management, have joined forces with Lonsec and Milliman to participate on the industry panel, which aims to provide financial planners with thought leadership on a variety of topics relevant to constructing portfolios in retirement.

The establishment of the industry panel follows the recent launch of Lonsec Retire. 

a collaboration between Lonsec and Milliman aimed at providing financial planners with a central access point for the latest thinking and practical portfolio solutions to assist financial planners in meeting the investment needs of retirees.

Lukasz de Pourbaix, General Manager – Lonsec Investment Consulting, said the selection process for the industry panel considered a number of factors including a proven commitment to addressing the investment challenges facing retirees and the necessary resources and ability to provide a diverse range of views in relation to retirement issues. “We are very pleased with the positive response we have had to the industry panel from subscribers to Lonsec Retire. We believe that the calibre and diversity of the selected panel members is a further endorsement of the path we have chosen to take.”

Wade Matterson, Practice Leader at Milliman said that “retirement is a significant issue domestically and globally and therefore requires a broad industry approach to tackling the challenges facing retirees. The formation of an industry panel is a step in this direction and will add a valuable resource for advisers in the retirement space”.

Financial planners will be able to access the industry panel thought material via the Lonsec Retire website on a subscription basis.

The website offers an extensive service across three advice modules – Research, Solutions and Industry Panel – providing white papers and detailed research on topics such as longevity risk, the politics of pensions and sequencing risk.

The post Lonsec & Milliman Forms Industry Panel for Retirement appeared first on AdviserVoice.

Lonsec and Milliman launch new retirement website.

Investment research house Lonsec Research (Lonsec), in partnership with global actuarial and consulting firm Milliman, yesterday unveiled a retirement website designed to provide practical and implementable solutions for financial advisers providing advice to retiree clients.

As Australia’s population ages, the funding of retiree pensions represents one of the greatest challenges facing the industry. In response, Lonsec and Milliman have developed a centralised online solution for objectives-based retirement portfolio construction innovation and thought leadership, giving financial advisers the tools and strategies to provide better retirement solutions for their clients.

Lukasz de Pourbaix, General Manager – Lonsec Investment Consulting, said despite increased awareness of the investment issue relating to retirement; there were no real practical adviser solutions in the market.

“We hear about it everywhere – an increasing number of Australians facing retirement and with that brings new investment strategy and investment challenges. However, no one has been working to provide a practical solution for financial advisers to deal with some of these challenges. We have developed an end-to-end solution to help to support advisers faced with the need to provide advice to the ever-growing group of Australian retirees,” said Mr de Pourbaix.

Lonsec Retire (www.lonsecretire.com.au) offers an extensive service to subscribers across three advice modules – Research, Solutions and Industry Panel.

The Research module provides thought leadership, such as white papers and detailed research on topics such as longevity risk, the politics of pensions and sequencing risk. It is aimed at assisting financial advisers in their discussions with clients. This module is home to the second jointly authored white paper from Lonsec and Milliman launched today, entitled: ‘Smiles, Handshakes & Farewells…..Then What? – The changing dynamics of wealth, risk and needs in retirement’. 

“For individuals, as retirement approaches, investment decisions and attitudes to risk naturally change. Building on our initial discussions, this paper looks to provide practical support to financial advisers in offering strategic advice and actively managing changing behavioural factors to produce better outcomes for clients,” said Mr Wade Matterson, Practice Leader, Milliman. 

According to Mr de Pourbaix, despite the growing number of retirement financial products in the market, there continues to be a lack of guidance around constructing objective based portfolios, hence the development of the Solutions module.

The Solutions module has three components focused on providing practical portfolio solutions for financial advisers.

“The first component is a retirement portfolio construction guide, which details the financial planning process and provides a practical guide for constructing an implementable objectives-based portfolio. The second is an approved product list that spans a broad range of quality financial products researched by Lonsec, linking directly to Lonsec’s in-depth research reports.

The post Demographic tidal wave effects felt throughout financial services appeared first on AdviserVoice.

“This work aims to combine Lonsec’s strong portfolio construction processes and established relationships with financial advisers with Milliman’s global expertise and actuarial rigour in providing retirement advice to institutions globally,” said Mr Lukasz de Pourbaix, Head of Investment Consulting, Lonsec.

“Together, Lonsec and Milliman will provide extensive insight, as well as a solution-set that is closely aligned to the challenges facing Australian advisers in a post Future of Financial Advice environment and which also meets the needs of superannuation funds and institutions,” said Mr Wade Matterson, leader of Milliman’s Australian Financial Risk Management practice.

The announcement follows the 2012 release of a jointly authored white paper contending that the current financial advice model serving retirees is suboptimal. The white paper, entitled ‘Boomers, Herding, Denial and Zeitgeist: Who will be First to Grasp the Post-Retirement Advice Opportunity?’ challenges some commonly used approaches to managing post-retirement portfolios. It also provides insight into the direction Lonsec and Milliman believe the advice process and the portfolio construction approach should be heading.

“Lonsec’s expertise in generating investment insight and advice solutions makes it the logical choice and a valuable research partner,” said Mr Matterson.

“Lonsec has one of the most experienced and well-resourced research and investment consulting teams in the Australian market. It offers in-depth and implementable investment research and advice, across a broad product range and has a long history of providing investment research and investment consulting services to financial adviser groups. It has been our experience that Lonsec’s experienced analysts and consultants have a sound understanding of the advice processes and financial products used in both the accumulation and retirement phases of the investor lifecycle,” he said.

“As an institutional retirement specialist, and one of the world’s largest actuarial and consulting firms, Milliman brings more than 60 years of thought-leadership in the insurance and wealth management industries to the table,” said Mr de Pourbaix.

“Its Australian practice combines that extensive base of knowledge with a deep understanding of the specific challenges, and emerging issues, of retirement incomes policy and trends in the local market,” he said.

Lonsec and Milliman believe that future success in funds management and financial advice will hinge on genuinely responding to the needs of retirees. By leveraging their respective skill sets and strengths, Lonsec and Milliman believe their partnership will achieve this goal. Further initiatives are planned to address specific post-retirement investment issues in detail, offering progress towards timely solutions.

The post Lonsec and Milliman to target outcomes-led retirement advice solutions appeared first on AdviserVoice.

In a jointly authored white paper released today, they contend that the current financial advice model serving retirees is suboptimal.

The white paper, entitled: ‘Boomers, Herding, Denial and Zeitgeist: Who will be First to Grasp the Post-Retirement Advice Opportunity?’ challenges some commonly used approaches to managing portfolios in post-retirement. It also provides insight into the direction they believe the advice process and the portfolio construction approach should be heading.

The size of the baby-boomer pool by number, and its aggregate wealth, has meant that boomers have shaped entire industries and will continue to do so. As boomers enter retirement, their needs and objectives inherently change, as do the risks they face.

At the same time, their purchasing behaviour, the level of engagement with their finances and access to information, is also changing. This adds up to mounting expectations of the performance of the advice process and the products they are invested in.

“There is increasing recognition of the seriousness of Australia’s retirement funding issue and general longevity risk. With a growing number of baby-boomers reaching retirement age, and the end of the bull market in Australian equities in 2008, many retirees – and their advisers – are questioning how they will meet their retirement needs in the future,” said Mr Wade Matterson, Practice Leader, Milliman.

“To date, solutions to these challenges have tended to be product driven rather than advice driven, with many retirement strategies lacking analytical rigour. While there is a growing number of retirement products on the market, there continues to be a lack of guidance around constructing portfolios to meet retiree objectives, with much of the industry anchored to approaches more relevant to accumulators,” said Mr Lukasz de Pourbaix, Head of Investment Consulting, Lonsec.

Lonsec and Milliman believe a new approach is required to produce an outcomes-led advice solution that is closely aligned to the challenges facing advisers in a post FoFA environment and which also meets the needs of superannuation funds and institutions.

The white paper leverages Lonsec’s strong portfolio construction processes and Milliman’s global expertise and actuarial rigour in providing retirement advice to institutions globally. It contends:

• The current financial advice model serving retirees is suboptimal.
• The suite of readily-available products, tailored specifically for retirees, is too limited.
• While the financial services industry is busy identifying the challenges and debating the issues of post-retirement investing, solutions and responses have been thin on the ground.
• It is inevitable that the needs of boomers in retirement will have to be met. But to ‘follow the money’ significant wealth industry business, product and advice process reengineering must occur.

It will be no small task, but the rewards for first movers who offer relevant, strategically-driven and robustly-tested advice solutions and products to retirees will be great. It asks: Who will be first to grasp the post-retirement advice opportunity?

Lonsec and Milliman believe that future success in funds management and financial advice will hinge on genuinely responding to the needs of retirees. Further initiatives are planned to address specific post-retirement investment issues in detail, offering progress towards timely solutions. These initiatives will provide independent insight, as well as a solution-set, for Australian advisers, superannuation funds and institutions navigating the Australian retirement challenge.

The post Structural shift to fundamentally alter the provision of advice to retirees appeared first on AdviserVoice.