2016 - Investment News · 2017-05-06 · FSC’s role About the Financial Services Council The...

Annual Report2016

contents

FSC’s role pg 2

pg 3

pg 5

pg 16

pg 18

Independent chairman’s report

Performance report

Independent auditor’s report

Board members

pg 01Financial Services Council Annual Report 2016

FSC’s role

About the Financial Services Council

The FSC’s purpose is to:

The Financial Services Council of New Zealand Incorporated (FSC) has 12 member companies and 20 associate members at 30 June 2016. Companies represented in the FSC include the major insurers in life, disability, income, and trauma insurance, and some fund managers and KiwiSaver providers. Law firms, audit firms, and other providers to the financial services sector are represented among the associate members.

be recognised as an organisation that represents the interests of the New Zealand financial services industry, including to regulators and Government;

promote, assist and generally advance the interests of members.

promote best practice and integrity in the financial services industry, including through the institution of codes of conduct, standards and the publication of guidance for industry participants; and

promote the financial services industry for the economic benefit of New Zealand and to enhance the sustainability of the industry, whilst recognising the primacy of the interests of consumers;

develop and promote evidence-based policies and practices designed to assist New Zealanders to build and protect their wealth;

promote the financial services industry as a medium for investment and protection for consumers;


Report from the independent chairman, Rob Flannagan

The FSC’s work in the year to 30 June 2016 reflected - in large part - the change in regulation of financial services, with the Financial Markets Conduct Act 2013 in its final stages of implementation and the Government initiating its review of the statute covering financial advisors and product distribution by advisers.

Major activitiesSpecific work by the FSC included:

Contributing to the Government’s five-year review of the Financial Advisers Act 2008 and the Financial Service Providers (Registration and Dispute Resolution) Act 2008. This review is critical, because the advisers act effectively regulates the distribution of a large share of financial services products.

Working with providers, and the Inland Revenue Department to improve the GST treatment of unit trust management fees and income protection products. Also, seeking an income tax exemption for redemptions from certain Australian unit trust products.

Consulting with the Financial Markets Authority on its report on life insurances sales practices and establishing an on-going dialogue with the FMA on the subject. Building a stronger relationship with the FMA has been one of our priorities this year.

Completing the Mind the Gap initiative, which is aimed at raising awareness among consumers of the risk in under-insuring, or not insuring, their ability to earn income. That project was completed this year, and the resources are now online for consumers.

Publishing a commissioned review of the Government’s assessment of the initial years of KiwiSaver.

In June 2016, the FSC agreed to explore integration with Workplace Savings New Zealand (WSNZ), the body which represents KiwiSaver and superannuation schemes. That work remains underway in August 2016.

In June 2016, the boards established a steering committee, comprised of representatives of the FSC and WSNZ, which is overseeing work on a potential merger. Initially, the work has comprised an analysis of the two existing bodies and a study of what would be gained from merging them.

The forces driving a merger include the increasing emphasis on regulation in financial services in New Zealand, the rising expectations of consumers and the depth and range of products and services that digital technology is bringing. Together, these factors require better-organised advocacy on the part of financial services firms.

Exploring integration with Workplace Savings


Stable footing

Eleven members or associate members of the FSC notified their resignations in the year to October 2015. The notice period is 12 months. The majority of those members have returned – or remain active in the FSC - by mid-2016. At the date of this report, all of the major insurers, including those that are also banks, remain members of the FSC.

A handful of the resignations - from associate members - have taken effect. The resignations were unfortunate. However, I am confident that the FSC is steadily returning to a stable footing after a period of disruption. Notably, the FSC maintains the ability to do largely the same amount of work in the coming year, as it has done in the immediate past. We continue to contribute to consultation and work with the tax authority, with regulators, and in co-ordinating members.

Financial result for 2016

The FSC’s recorded a year-end surplus of $219,476, a 10.2% decrease on the surplus recorded in 2015. Our cash-on hand at 30 June was $268,445 and our net assets were $252,598. While the FSC’s immediate cash position appears to be very strong, that is more apparent than real.

Our interim office accommodation in Auckland has lowered our property costs. But that is unlikely to be the case in the long-term. Most importantly, we anticipate lower membership revenue in 2017. On a conservative forecast, we anticipate members’ revenue at a little over $800,000, a reduction of 28.2% on 2016. This reflects the across-the-board fee cut we implemented for 2017. Effectively, the fee cut returns some of the surplus direct to members, while retaining some of it to fund activities in 2017.

The year ahead

The FSC enters 2017 in a solid cash position. The changes we have made in the last 12 months mean the FSC is much leaner than it was and that it is paying much closer attention to the immediate interests of its members in regulation and tax.

A merger with WSNZ remains a prospect. However, if the board were to decide not to proceed with a merger, the FSC is still in a strong position that would allow it to continue, representing its members to regulators, the Government and consumers, in a professional and constructive way.


Financial reportFinancial Services Council of New Zealand Incorporated For the year ended 30 June 2016

Entity information

Independent Chair: Rob Flannagan Executive Director: Owen Gill

Officers of the Society

VGA Chartered Accountants Ltd Unit G1223 Edwin StreetMt EdenAuckland 1024 Phone: 09-638-8736

Chartered Accountants

BNZBankers

Physical AddressSuite 106, The Zone, 23 Edwin Street, Mt Eden, Auckland, 1024

Postal AddressPO Box 99581, Newmarket, Auckland, 1149

PricewaterhouseCoopers188 Quay Street,Private Bag 92162Auckland 1142

Auditors

Purpose of the society

IRD Number: 067-359-763

Activities of the Council include:

Presentation of the recommendations of the NZFSC members to Government and other relevant bodies;

a)

b)

c)

d)

Liaison with consumer representatives and other industry organisations;

Research and compilation of industry statistics for and on behalf of the life insurance, superannuation and managed funds industry; and

Monitoring industry practices and best practice guidelines.

Financial Services Council of New Zealand Incorporated (“NZFSC”)

Legal name of entity

Activities of the Council include:

Presentation of the recommendations of the NZFSC members to Government and other relevant bodies;

a)

b)

c)

d)

Liaison with consumer representatives and other industry organisations;

Research and compilation of industry statistics for and on behalf of the life insurance, superannuation and managed funds industry; and

Monitoring industry practices and best practice guidelines.

Entity’s purpose or mission

Entity typeIncorporated SocietyRegistration Number: 831771

Entity’s structureThe Financial Services Council of New Zealand Incorporated is an incorporated society.

It is governed by the Board which comprises member firms.

Main source of Entity’s cash & resourcesNZFSC is funded by subscriptions and fees paid by its members and associate members. These are set by the Board. Members and Associate Members provide representation and, in some cases, financial resources to committees formed by the Board to work on specific industry issues.


Summary of outcomesThroughout the year the Financial Services Council of New Zealand Incorporated ("NZFSC") has represented the interests of life, income and disability insurers, superannuation and managed funds, to the Government, including regulators, policy-makers, and Ministers.

The NZFSC has coordinated responses to regulation and policy changes that affect the Council's members. It has provided invaluable information useful to consumers of financial services provided by members of the NZFSC, whenever there is a demonstrated and unfulfilled need.

Area of work Specific activity & outcome

Co-ordination with regulatorsOne meeting has been held with the Financial Markets Authority (FMA) on its public report on life insurance sales practices issued June 2016. There is intent to continue this coordinated work with the FMA by addressing concerns raised by the FMA.

With regards to the GST treatment of income protection products, and unit trust fees: two submissions have been made in order to assist in resolving these two issues. Additionally, a submission to the IRD on the tax treatment of redemptions from Australian unit trusts was also made in the current year.

This was an initiative aimed at raising awareness among New Zealanders as to the potential income gap they face if they are unable to work. A seminar was held in Auckland in November 2015; a survey of New Zealand households was released in November; online consumer resources were launched, May 2016. This initiative is now complete.

Submissions on the initial paper were published for the review in 2015, and then again on the options paper in February 2016. This is on-going work, as the review of the Act is yet to be completed.

A report was prepared by consulting actuarial firm Melville Jessup Weaver (MJW), published November 2015. The report was commissioned by NZFSC, but published by MJW. The report’s findings and recommendations are MJW’s alone and are not necessarily the views of either the NZFSC or its members. This work is now complete and the report is available online.

Published a commissioned New Zealand Institute of Economic Research (NZIER) paper in August 2015, reviewing and contesting the Government’s joint agency assessment (issued February 2015) of the initial years of KiwiSaver. The NZIER report is available online.

Co-ordination with the IRD

Review of retail life insurance advice

Providing industry analysis and information

Government review of the Financial Advisers Act 2008 and Financial Service Providers (Registration and Dispute Resolution) Act 2008

Providing consumer information – Mind the Gap

Description of Specific Projects and Results

Statement of service performance

Financial Services Council of New Zealand Incorporated For the year ended 30 June 2016


Membership subscriptions 1,121,773

3216,966

23,0719,765

223

29,477200

44,34228,643

53957,3563,636

81,000

6,947

15,631

14,751

12,925

50

30,205

4,03710,666

4,491

250,691

68,3881,823

3,414

9006,500

11,8318,715

1246,676

20,0991,891

66,620

1,077

2,790

14,7094,3753,0621,230

61,6837,699

369,944180

12,4783,0748,616

20,076

1,312,363 1,084,372

180,000

10,466

124

1,068,611

10,723

5,038

MJW project pledges

Interest income

Reimbursements

ACC leviesAccounting - annual accountsAccounting - monthly servicesAuditBank & Finance ChargesCleaning & MaintenanceCommunications & WebsiteConference expensesConsultantsContractorsDepreciationDoubtful debtsEntertainmentIndependent chairInsuranceKiwiSaver employer contributions

Loss on disposal of fixed assetsMinute taking servicesOffice administrationOffice expensesPhotocopyingPower & gasRent & ratesRestructuringSalaries & AllowancesStaff trainingSubscriptions & MembershipsSundry expensesTelephoneTravel & Accomodation

Legal expenses

Statement of financial performance

Revenue 20152016

Total revenue

Expenses


-

-

-

-

-

-

-

-

----

-

Project Expenses - Fair Tax for Savers

Project Expenses - Financial literacy

Project Expenses - Insurance Gap

Project Expenses - MJW

Project Expenses - KiwiSaver

Project Expenses - GST on managed funds

Project Expenses - Review of Financial Advisors Act

Project Expenses - Five Families Campaign

Project Expenses - Mind the Gap

Project Expenses - FMA Insurance report

56,055

-

-

26,000

10,000

-

-

-

-

-

-

31,940

200,000

7,862

56,341

131,857

36,295

839,831

45,315

244,541

69,455

48,860

658

456,924

1,092,887

219,476

Total Project related expenditure

Total Expenses

Surplus for the year

20152016Project related expenditure


Statement of financial performance

Statement of changes in accumulated funds

Financial Services Council of New Zealand Incorporated As at 30 June 2016

Opening balance

Increases

Surplus for the year

Total increases

Total accumulated funds

33,122

219,476

219,476

252,598

244,541

244,541

33,122

(211,419)

Accumulated funds 20152016


Accumulated funds/(deficit)

Current year surplus

Statement of financial position

Financial Services Council of New Zealand Incorporated As at 30 June 2016

30 JUN 2016 30 JUN 2015Assets

Current assets

Cash & Bank

Total Cash & Bank

Bus First On Call A/CNon Profit Org A/CPetty Cash

Trade receivablesPrepaymentsGST ReceivableIncome Tax Receivable

Total Current Assets

Total Assets

Non-Current Assets

Current Liabilities

Total Current Liabilities

Total Liabilities

Chairman

day ofSigned on behalf of the members of the Incorporated Society this

Director

Total Accumulated Funds

Total Non-Current Assets

Property, Plant and Equipment

Trade payablesPAYEAccruals

247,476 120,946

14,949 12,152

268,445 133,822

298,710 163,033

299,248 164,110

252,598 33,122

46,650 130,988

46,650 130,988

252,598 33,122

538 1,077

20,969 12,826

2,810 4,711

- 50

10,677 10,4711,829 1,877

538 1,077

30,385 63,713

33,122 (211,419)

219,476 244,541

- 11,93516,265 55,340

pg 10

Liabilities

Net assets

Accumulated funds

Financial Services Council Annual Report 2016

19th September

Statement of cash flowsFinancial Services Council of New Zealand Incorporated For the year ended 30 June 2016

2016 2015

Net cash flows

Total cash flows from operating activities

Total cash flows from investing & financing activities

Receipts from members

Interest received

Cash receipts from project specific pledges

Payments to employees

Payments to suppliers

GST - net paid & collected

Income tax refunded / (paid)

Proceeds from sale of property, plant & equipment

Payment for property, plant & equipment

Other cash items from investing & financing activities

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Net change in cash for period

1,129,331 998,767

134,623

134,623 (43,512)

(46,926)

-

134,623 (43,512)

- 3,414

-

268,445 133,822

(1,077)

(56,424)

10,466 10,723

180,000 -

48 (601)

(4,322) (3,385)

(918,263) (509,416)

(262,627) (543,014)

-

133,822 177,334

60,915


Cash flows from operating activities

Cash flows from investing & financing activities

Cash balances

Financial Services Council of New Zealand Incorporated is an Incorporated Society, registered in accordance with the Incorporated Societies Act 1908.

Basis of Preparation The Board has elected to apply PBE SFR-A (PS) Public Benefit Entity Simple Format Reporting – Accrual (Not-for-Profit) on the basis that the Society does not have public accountability (as defined) and has total annual expenses of less than $2 million.All transactions in the Performance Report are reported using the accrual basis of accounting.The Performance Report is prepared on the assumption that the Society will continue to operate in the foreseeable future.

Historical CostThis Performance Report has been prepared on a historical cost basis. The Performance Report is presented in New Zealand dollars (NZ$) and all values are rounded to the nearest NZ$, except when otherwise indicated.

Changes in Accounting PoliciesThe Society transitioned to reporting on the basis of PBE SFR-A (PS) Public Benefit Entity Simple Format Reporting – Accrual (Not-for Profit) on 1 July 2015. This is as compared to preparation of general purpose financial information in accordance with New Zealand equivalents to International Financial Reporting Standards for Public Benefit Entities (NZ IFRS PBE) in prior years.This change in Accounting Policies had no material effect on either the current period figures or the comparative figures.

Goods and Services TaxAll amounts are stated exclusive of goods and services tax (GST) except for accounts payable and accounts receivable which are stated inclusive of GST.

Income TaxIncome tax is accounted for using the taxes payable method. The income tax expense in profit or loss represents the estimated current obligation payable to Inland Revenue in respect of each reporting period after adjusting for any variances between estimated and actual income tax payable in the prior reporting period.

Notes to the peformance report

1

2

Reporting entity

Statement of Accounting Policies


Revenue is measured at the fair value of the consideration received or receivable for the sale of goods and services, excluding goods and services tax rebates and discounts, to the extent it is probable that the economic benefits will flow to the entity and revenue can be reliably measured. Interest received is recognised as interest accrues, gross of refundable tax credits received. Government grants and other Pledged Monies are recognised as revenue on receipt where no performance conditions have been specified on receipt of the grant.Government grants and other Pledged Monies requiring specified future conditions to be met are recognised as a liability on receipt. The grants are recognised as income over the period that the specified conditions are complete and the associated costs are recognised.

Fixed Assets and DepreciationAll fixed assets are recorded at cost less accumulated depreciation. Depreciation of the assets has been calculated at the maximum rates permitted by the Income Tax Act 2007.

Accounts ReceivableReceivables are stated at their estimated realisable value. Bad debts are written off in the year in which they are identified.

ResearchResearch expenses are brought to account in the Statement of Financial Performance in the period incurred.

3Revenue recognition



4 Income Tax Reconciliation


2016 2015

Net profit (loss) per financial statements

Current year earnings

Total net profit (loss) per financial statements

Deductions from tax payable

Dividend imputation credits

Resident withholding tax paid

Provisional tax paid

Outstanding balances from prior years

Income tax payable (refund due)

Other credits available

Total deductions from tax payable

Income tax losses available at balance date to be carried forward $58,978 (Last Year: $10,036). The losses are subject to Inland Revenue Department confirmation.

Additions to taxable profit

Other items to add back

Total additions to taxable profit

Taxable profit (loss)

Tax payable at 28%

Deductions from taxable profit

Losses brought forward

Non-assessable items

Total deductions from taxable profit

219,476 244,541

10,036

(10,036)

254,577

238,668

15,909

268,418

(58,978)

278,454

- -

- -

- -

219,476 244,541

- -

1,829 1,877

1,829 1,877

(1,829) (1,877)

- -

- -

- -



The majority of the Society income has been received from Members through subscriptions to fund general services performed for the Members. Additionally, Members are paid for consultancy and audit services. The following associate members have provided services to the Society in relation to its activities during the year. These services and payments for them were made on normal commercial terms.

5

6

Related Parties

Fixed Assets

7AuditThis Performance Report has been subject to an audit engagement, please refer to Auditor's Report.

Cost Price

Office Equipment

Kensington Swan

KPMGKPMG

Pricewaterhouse CoopersPricewaterhouse Coopers

Melville Jessup WeaverMelville Jessup Weaver

MorningstarMorningstar

Ernst & YoungErnst & Young

Bell Gully

Chatswood Consulting Limited

3,232

3,232

2,154

2,154

1,077

1,077Total Fixed Assets

As at 30 June 2016 As at 30 June 2015

Accum. Depn.Cost Price

3,232

3,232

2,694

2,694

538

538

Accum. Depn. Book value Book value

8Capital Expenditure CommitmentsThere are no liabilities in respect of capital expenditure at balance date other than those provided for in the accounts (Last Year: $nil).

9Contingent LiabilitiesThere are no contingent liabilities at balance date (Last Year: $nil).

Year to 30 June 2016 Year to 30 June 2015


Board membersAs at 30 June 2016(and members they represent)

Name

Rob Flannagan Independent chairman

ANZ

Bank of New Zealand

Partners Life

Westpac New Zealand

Fidelity Life

Cigna New Zealand

Asteron Life

Sovereign

AMP New Zealand

Executive director

John Body

Susan Basile

Naomi Ballantyne

Ed Eadie

Nadine Tereora

Nigel Jackson

Lance Walker

Chris Lamers

Simon Hoole

Owen Gill

Role Organisation


Financial Services Council of New ZealandSuite 106, The Zone, 23 Edwin Street, Mt Eden, Auckland, 1024

PO Box 99581, Newmarket, Auckland, 1149www.fsc.org.nz

2016 - Investment News · 2017-05-06 · FSC’s role About the Financial Services Council The...

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