RC speech: Working with the retirement village industry

Retirement Commissioner Jane Wrightson’s speech to the Retirement Villages Association Policy and Finance Forum
Christchurch, October 2020

Ngā mihi mahana o te wā kia a tātou

It’s a privilege to be invited to speak with you today. I’ve been asked to share my observations of the retirement village sector so far and how my office, the Commission for Financial Capability (CFFC), plans to work with you. I’ll briefly cover three subjects: the impact of COVID-19, industry collaboration, and change, and I’m happy to take questions at the end. And I’m assuming you don’t want me to be boring - so I’ll be a little argumentative in places to give you a healthy appetite for lunch.

First – COVID-19. What a year! I am so proud of how New Zealand has responded to this crisis and so proud that we’re mostly managing to stay focused on big picture issues, not the political incompetency we are seeing in so many other countries.

It was very helpful for me that the RVA agreed to let me sit in on operators’ calls during the first lockdown. It was mutually beneficial of course, since I was able to take some thoughts back to government, but it was also a great learning exercise for me one month after starting my job as I saw the sector tackle this extraordinary event with common sense and a good regard for resident safety. We were also pleased to be able to help share guidelines on keeping residents and staff safe at the various Alert Levels through the CFFC’s website and social media channels. I do know you got some grief from some residents and their families – older people can be stubborn! But you did the right thing and it paid off.

My views on the RV sector are becoming more informed now. I already had experience as a consumer, having worked with my father to secure him a place a few years ago, and we were lucky to have found a very good place with competent management. I think that’s the case with most of you. But getting proper consumer information and advice 10 years ago was very difficult, let alone informed legal advice, and the memory of this struggle has stayed with me, particularly when I observe the small number of villages and residents that get into trouble.

It’s a strength that the industry has involved itself in self-regulation. It’s the very best incentive to get things right first time and to fix emerging problems yourselves. Mostly problems are fixed with the great customer service that many of you are famous for.

Second: Collaboration. The role the CFFC mainly plays here is working on behalf of the public. You all know the RV business and regulatory environment is complex. Complexity is never good for members of the public – and I would observe this complexity doesn’t always help you as operators and owners, either. This is one reason I was sad to learn even getting a Plain English Code - a standard document in most other industries – had been a difficult process. So I’m grateful that the RVA is now progressing this as a priority.

I’m also interested to see how the RVA tackles the subject we at the CFFC decided was to form the basis of our monitoring report this year - gaining insights into the resale of licenses to occupy, and disposal behaviour and trends. The RVA has offered to conduct the research itself and I’ve agreed to this on the basis that we have some involvement in setting the parameters so the exercise is not a whitewash. If we can work collaboratively on this, and publish a robust document, it’s a good example of how our relationship can be fruitful. The CFFC will do the research ourselves if we need to, but right now we’re looking to the RVA to make this project better than perhaps the CFFC could alone.

There are good examples of the CFFC and RVA working together – the formulation of the Summary of Key Terms, the 2015 Code changes, and the recent consumer information webinars hosted by Troy Churton from our office and Maggie Owens from your executive, which had great feedback. But one of my early observations of the RV sector is there’s still an element of defensiveness in talking about change. Possibly this wariness is the result of some poor earlier experiences - I don’t know this – possibly you think there’s too much commercial sensitivity in wider discussion, or possibly it’s just that you don’t like public servants! But my clear message to you is that working collaboratively with us and wider government is just smart. Business life in the 21st century is tough enough without unnecessary battles; mostly, collaboration results in better outcomes as it allows - indeed welcomes - different perspectives to enrich the conversation and resulting solutions. This is how the CFFC wants to work with you.

And my third point is about change. I think the RV sector will be facing a few challenges in the next decade or so. We’re in the middle of a comfortably-off baby boomer bulge right now, but I do wonder what your target market looks like in 10 years’ time. After the flurry of immediate post-COVID interest, it’s fairly obvious that your next generation of retirees is likely to be a bit poorer in greater numbers, and likely to NOT be mortgage free.

So I wonder if the current strong focus on property development that is weighted financially in favour of operators might need a bit of finessing. Will there be innovation in the RV space? In licence conditions? Dealing with changes in demography? More affordable options? Meeting different demands for health care? Ways to give residents a better share in power and influence?

The market - you, the industry - is of course best equipped to deal with changing times, and we’ll doubtless see new approaches emerging. But will you be disrupted? Will new models threaten your investments? Will younger entrepreneurs look at current weaknesses and offer a different deal that customers like better? How will the current largely affluent white residents look to the majority of the country? Will those new wealthy residents become more litigious when they disagree with you? Could Māori papakāinga models start looking attractive? Is the complaints system robust and independent and consistent enough to deal with that? If a village goes under, is there enough protection of consumer interest? I really admire the way the sector swings into action when one of you is in trouble – but I do wonder if trusting that will always happen will be enough.

These are only some of the questions I think the sector is facing. And if you think disruption won’t happen, remember I come from the media sector that poo-poohed disruption until it was a bit too late.

Change won’t stop public sector people like me looking under the hood occasionally to see if things are as good and as fair as they can be to customers and their whānau who are usually resilient when they enter a village, but become vulnerable within a decade or so. I’m hoping to release a brief discussion paper shortly, not being radical but setting out the strengths and weaknesses of the sector and its framework. All sectors have strengths and weaknesses and it’s silly to ignore the idea that there can be improvement.

I appreciate the RVA’s work in advocating for village owners. I’m grateful for the assistance of your executive director John Collyns, and president Graham Wilkinson, in helping me learn more about your business.

And I appreciate the work of the Retirement Village Residents’ Association in advocating for residents – it is getting stronger as an organisation and is an important sector voice.

Coming from another largely self-regulated sector I do think there can be improvements in how each organisation deals with the other. After all, you share the same interests in resident welfare. I look forward to informed and solutions-based advocacy from you both.

Finally, I’m grateful for the opportunity to meet you today and to speak with you. Retirement village living offers a wonderful residential option and I look forward to seeing the sector grow and flex in response to a changing population, with an increasing interest in ensuring older New Zealanders are looked after well.

Nō reira tēnā koutou, tēnā koutou, tēnā koutou katoa