contents FSC s role pg 2 Independent chairman s report Performance report Independent auditor s report Board members pg 3 pg 5 pg 16 pg 18

Transcription

1 2016 Annual Report

2 contents FSC s role pg 2 Independent chairman s report pg 3 Performance report pg 5 Independent auditor s report pg 16 Board members pg 18 pg 01

3 FSC s role About the Financial Services Council The Financial Services Council of New Zealand Incorporated (FSC) has 12 member companies and 20 associate members at 30 June 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. The FSC s purpose is to: be recognised as an organisation that represents the interests of the New Zealand financial services industry, including to regulators and Government; promote the financial services industry as a medium for investment and protection for consumers; develop and promote evidencebased policies and practices designed to assist New Zealanders to build and protect their wealth; 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; 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, assist and generally advance the interests of members. pg 02

4 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 activities Specific work by the FSC included: Contributing to the Government s fiveyear review of the Financial Advisers Act 2008 and the Financial Service Providers (Registration and Dispute Resolution) Act 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 ongoing 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 underinsuring, 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. Exploring integration with Workplace Savings 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 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 betterorganised advocacy on the part of financial services firms. pg 03

5 Stable footing Eleven members or associate members of the FSC notified their resignations in the year to October The notice period is 12 months. The majority of those members have returned or remain active in the FSC by mid2016. 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 coordinating members. Financial result for 2016 The FSC s recorded a yearend surplus of $219,476, a 10.2% decrease on the surplus recorded in Our cashon 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 longterm. Most importantly, we anticipate lower membership revenue in On a conservative forecast, we anticipate members revenue at a little over $800,000, a reduction of 28.2% on This reflects the acrosstheboard fee cut we implemented for Effectively, the fee cut returns some of the surplus direct to members, while retaining some of it to fund activities in 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. pg 04

6 Financial report Financial Services Council of New Zealand Incorporated For the year ended 30 June 2016 Purpose of the society Activities of the Council include: a) b) c) d) Presentation of the recommendations of the NZFSC members to Government and other relevant bodies; 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. IRD Number: Officers of the Society Independent Chair: Rob Flannagan Executive Director: Owen Gill Chartered Accountants VGA Chartered Accountants Ltd Unit G12 23 Edwin Street Mt Eden Auckland 1024 Phone: Bankers BNZ Auditors PricewaterhouseCoopers 188 Quay Street, Private Bag Auckland 1142 Entity information Legal name of entity Financial Services Council of New Zealand Incorporated ( NZFSC ) Entity type Incorporated Society Registration Number: Entity s purpose or mission Activities of the Council include: a) b) c) d) Presentation of the recommendations of the NZFSC members to Government and other relevant bodies; 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 structure The 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 & resources NZFSC 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. Physical Address Suite 106, The Zone, 23 Edwin Street, Mt Eden, Auckland, 1024 Postal Address PO Box 99581, Newmarket, Auckland, 1149 pg 05

7 Statement of service performance Financial Services Council of New Zealand Incorporated For the year ended 30 June 2016 Summary of outcomes Throughout 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, policymakers, 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. Description of Specific Projects and Results Area of work Coordination with regulators Coordination with the IRD Providing consumer information Mind the Gap Government review of the Financial Advisers Act 2008 and Financial Service Providers (Registration and Dispute Resolution) Act 2008 Review of retail life insurance advice Providing industry analysis and information Specific activity & outcome One meeting has been held with the Financial Markets Authority (FMA) on its public report on life insurance sales practices issued June 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 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 This is ongoing 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 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. pg 06

8 Statement of financial performance Revenue Membership subscriptions 1,121,773 MJW project pledges 180,000 Interest income 10,466 Reimbursements 124 Total revenue Expenses ACC levies Accounting annual accounts Accounting monthly services Audit Bank & Finance Charges Cleaning & Maintenance Communications & Website Conference expenses Consultants Contractors Depreciation Doubtful debts Entertainment Independent chair Insurance KiwiSaver employer contributions Legal expenses Loss on disposal of fixed assets Minute taking services Office administration Office expenses Photocopying Power & gas Rent & rates Restructuring Salaries & Allowances Staff training Subscriptions & Memberships Sundry expenses Telephone Travel & Accomodation 1,312,363 1,084, ,966 23,071 9, , ,342 28, ,356 3,636 81,000 6,947 15,631 12,925 30,205 4, ,691 14, ,037 10,666 1,068,611 10,723 5, ,500 11,831 8, ,676 20,099 1,891 66,620 1,077 2,790 68,388 1,823 3,414 14,709 4,375 3,062 1,230 61,683 7, , ,478 3,074 8,616 20,076 pg 07

9 Statement of financial performance Project related expenditure 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 Total Project related expenditure Total Expenses ,000 56,341 36,295 45,315 69,455 48, ,924 1,092, ,055 10,000 26,000 31,940 7, , ,831 Surplus for the year 219, ,541 pg 08

10 Statement of changes in accumulated funds Financial Services Council of New Zealand Incorporated As at 30 June 2016 Accumulated funds Opening balance Increases Surplus for the year Total increases Total accumulated funds 33, , , ,598 (211,419) 244, ,541 33,122 pg 09

11 Statement of financial position Financial Services Council of New Zealand Incorporated As at 30 June 2016 Assets Current assets Cash & Bank Bus First On Call A/C Non Profit Org A/C Petty Cash Total Cash & Bank Trade receivables Prepayments GST Receivable Income Tax Receivable Total Current Assets NonCurrent Assets Property, Plant and Equipment Total NonCurrent Assets Total Assets Liabilities Current Liabilities Trade payables PAYE Accruals Total Current Liabilities Total Liabilities 30 JUN JUN , ,946 20,969 12, , ,822 14,949 12,152 2,810 4,711 10,677 10,471 1,829 1, , , , , , ,110 30,385 63,713 11,935 16,265 55,340 46, ,988 46, ,988 Net assets Accumulated funds Accumulated funds/(deficit) Current year surplus Total Accumulated Funds 252,598 33,122 33,122 (211,419) 219, , ,598 33,122 Signed on behalf of the members of the Incorporated Society this Chairman 19 th day of September Director pg 10

12 Statement of cash flows Financial Services Council of New Zealand Incorporated For the year ended 30 June 2016 Cash flows from operating 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) ,129, ,767 10,466 10, ,000 (262,627) (543,014) (918,263) (509,416) (4,322) (3,385) 48 (601) Total cash flows from operating activities 134,623 (46,926) Cash flows from investing & financing activities Proceeds from sale of property, plant & equipment Payment for property, plant & equipment Other cash items from investing & financing activities 60,915 (56,424) (1,077) Total cash flows from investing & financing activities Netcashflows 3, ,623 (43,512) Cash balances Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period Net change in cash for period 133, , , , ,623 (43,512) pg 11

13 Notes to the peformance report 1 2 Reporting entity Financial Services Council of New Zealand Incorporated is an Incorporated Society, registered in accordance with the Incorporated Societies Act Statement of Accounting Policies Basis of Preparation The Board has elected to apply PBE SFRA (PS) Public Benefit Entity Simple Format Reporting Accrual (NotforProfit) on the basis that the Society does not have public accountability (as defined) and has total annual expenses of less than $2 million. All transactions in the Performance Report are reported using the accrual basis of accounting. The Performance Report is prepared on the assumption that the Society will continue to operate in the foreseeable future. Historical Cost This Performance Report has been prepared on a historical cost basis. The Performance Report is presented in New Zealand dollars (NZ$) and all values are rounded to the nearest NZ$, except when otherwise indicated. Changes in Accounting Policies The Society transitioned to reporting on the basis of PBE SFRA (PS) Public Benefit Entity Simple Format Reporting Accrual (Notfor Profit) on 1 July 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 Tax All amounts are stated exclusive of goods and services tax (GST) except for accounts payable and accounts receivable which are stated inclusive of GST. Income Tax Income 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. pg 12

14 Notes to the peformance report 3 Revenue recognition 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 Depreciation All 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 Accounts Receivable Receivables are stated at their estimated realisable value. Bad debts are written off in the year in which they are identified. Research Research expenses are brought to account in the Statement of Financial Performance in the period incurred. pg 13

15 Notes to the peformance report Income Tax Reconciliation Net profit (loss) per financial statements Current year earnings Total net profit (loss) per financial statements 219, , , ,541 Additions to taxable profit Other items to add back Total additions to taxable profit Deductions from taxable profit Losses brought forward Nonassessable items Total deductions from taxable profit Taxable profit (loss) 10, , ,454 (58,978) 15, , ,577 (10,036) Tax payable at 28% Deductions from tax payable Dividend imputation credits Resident withholding tax paid Provisional tax paid Outstanding balances from prior years Other credits available Total deductions from tax payable Income tax payable (refund due) 1,829 1,877 1,829 1,877 (1,829) (1,877) 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. pg 14

16 Notes to the peformance report 5 Related Parties 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. Year to 30 June 2016 Year to 30 June 2015 KPMG Pricewaterhouse Coopers Melville Jessup Weaver Morningstar Ernst & Young Bell Gully Chatswood Consulting Limited Kensington Swan KPMG Pricewaterhouse Coopers Melville Jessup Weaver Morningstar Ernst & Young 6 Fixed Assets As at 30 June 2016 As at 30 June 2015 Cost Price Accum. Depn. Book value Cost Price Accum. Depn. Book value Office Equipment 3,232 2, ,232 2,154 1,077 Total Fixed Assets 3,232 2, ,232 2,154 1,077 7 Audit This Performance Report has been subject to an audit engagement, please refer to Auditor's Report. Capital Expenditure Commitments 8 There are no liabilities in respect of capital expenditure at balance date other than those provided for in the accounts (Last Year: $nil). Contingent Liabilities 9 There are no contingent liabilities at balance date (Last Year: $nil). pg 15

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19 Board members As at 30 June 2016 (and members they represent) Name Role Organisation Rob Flannagan John Body Susan Basile Naomi Ballantyne Ed Eadie Nadine Tereora Nigel Jackson Lance Walker Chris Lamers Simon Hoole Owen Gill Independent chairman Executive director ANZ Bank of New Zealand Partners Life Fidelity Life Asteron Life Westpac New Zealand Cigna New Zealand Sovereign AMP New Zealand pg 18

20 Financial Services Council of New Zealand Suite 106, The Zone, 23 Edwin Street, Mt Eden, Auckland, 1024 PO Box 99581, Newmarket, Auckland,