Advisers shaken but not stirred

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Many financial planners and investment advisers don't plan to change their approach to investing in finance companies, despite a number of these businesses falling over in the past year and a half.

Friday, September 21st 2007, 5:36AM

Of those who said they would change the way they invest, the main themes were that they would be more careful and cautious and a number said they would limit their exposure.

For instance one adviser said he would limit each company to a maximum of 7% in a portfolio and for finance companies, in total, to not exceed 25% of the overall portfolio.

One of the slightly concerning trends to come from the survey is the comments round research.

The majority of respondents who answered this question (57%) said they were not prepared to pay for research on finance companies.

This is possibly explained by the fact that most of research is free, or at least the rating is free.

Added to that is the finding that Standard and Poor's was rated as the most important research. However, one assumes that all this research is, is a rating. It appears very few people actually have access to firm's full reports on finance companies it has rated.

Also S&P has only rated a handful of companies.

The survey also asked what fixed income products advisers used in their portfolios. To some it may come as a surprise that the listed debt securities and managed funds were more popular than finance companies and term deposits. CDO backed funds were the least popular.

Respondents were asked to name their top five finance companies. While the bigger players such as South Canterbury, Strategic, UDC, Hanover and Marac all were popular, there were 27 finance companies mentioned.

Just over 45% of respondents described themselves as financial planners and 35% classified themselves as investment advisers. The majority of respondents (62.5%) were members of the Institute of Financial Advisers.

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