[Weekly wrap] Botherway's mission complete

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After an eventful 18 months in the job Simon Botherway has resigned from ANZ Wealth during a week that also featured an adviser being convicted for a $15 million fraud and the government rejecting concerns about a lack of advice for potential SOE share investors.

Friday, September 7th 2012, 8:41AM

by Niko Kloeten

Since he sold Brook Asset Management to Macquarie in 2008, Botherway has taken on a number of short "fix-it" jobs where he goes in with a clear objective, gets it done and then moves on.  Before his ANZ Wealth role Botherway was in charge of the FMA establishment board; he also had a brief stint as a director of the DNZ Property Fund and was on the board of the former Securities Commission.

It will be interesting to see where he ends up next.  Botherway carries a clean reputation, has a history of shareholder activism and has not presided over any destruction of investor wealth (unless you count what happened to Macquarie's investment in Brook since he left).  With Adam Feeley about to leave the SFO, the government could do much worse than Botherway as his replacement.  

Whoever becomes the next SFO boss, he or she will have to deal with what Feeley has described as a growing trend towards "affinity fraud", such as the Ponzi scheme run by Jacqui Bradley and her late husband Mike.  Bradley has this week been found guilty on all 75 charges brought by the SFO relating to $15 million swindled from investors, who were told their money was going into government bonds and other fictitious investments.  In reality, it was paying off other investors and funding the Bradleys' lifestyle.

Following the jury's unanimous verdict, Feeley made the observation that, with investors losing trust in the financial system after the finance companies, they are more vulnerable to being duped by supposed "friends".  It would also be naive to think that the new financial adviser regulatory regime could stop this type of fraud.  People such as the Bradleys are capable of ticking all the boxes and passing all the right exams and still ripping people off. 

Problem?  What problem?  The government isn't concerned about whether investors in the delayed SOE floats, who could number in the hundreds of thousands, will be able to get advice from only 2000 AFAs nationwide.  Steven Joyce said many of the investors would be first-time share buyers.  It's fair to assume most of these people have never received financial advice, at least not by a professional (uncle Jim's probably got a fair bit to say though).

There's a stench of hypocrisy from the government on this issue.  It has laid out a set of standards for those who wish to give investment advice but it could be argued the government is itself advising Kiwis to invest in these SOEs.  If someone has only $5000 spare and puts it all into Mighty River Power, is that really a prudent investment? If an adviser recommended that it would be raked over the coals.

Another big story in the adviser industry this week was Strategi's merger with Mentor Education (formerly Adviserlink), with the combined company to operate under the Strategi brand.  A number of reader comments have criticised the quality of what Adviserlink (now in liquidation) offered and this move should increase the quality of the offering by leveraging off the respective strengths of the two organisations.

Speaking of education, a certified assessor had some advice for those attending the PAA roadshow: don't overdo the paperwork.  It must be tempting, given the fear many advisers have about the new regulations, to print screeds and screeds of paper and think that more is better.  However, quality is clearly more important than quantity.

Remember Fundsource?  The research house that used to enjoy a monopoly in the New Zealand market has found the going tough since it was sold to the NZX in 2006, but its new boss is hoping to turn its fortunes around.  Although it has suffered from heavy competition from Morningstar, people I've spoken to say the big problem has been a lack of investment by the NZX.  With a new chief executive, the NZX is reviewing all its businesses.

One of the companies on the NZX, Investment Research Group (IRG), has continued towards its plan to become a listed shell by selling most of its Auckland advisory business to Forsyth Barr.  IRG has been struggling for years and by selling its advisory businesses it allows new investors to come in and try to improve the businesses and make them viable.

If you've got an hour to spare, it would be worth watching Hamish Douglass, chief executive of the Magellan Global Fund, speaking at the recent Magellan Global Briefing.  If not, it would be useful to at least skim through it as he candidly answers questions from the audience on portfolio management, macroeconomic concerns and the outlook for markets.

In insurance news, Cigna's direct-sales model is proving successful, while health insurer Accuro has received its first rating from Standard & Poor's and is happy with it.  Tower has warned the earthquake will lower its profit, while Russell Hutchinson wonders what the ideal medical insurance product would look like, and whether we are close to having it.

In mortgage news, TSB has been hit by a government policy change, Westpac has maintained its market share and a banking expert has predicted that bank bad debt charges are about to blow out again.  Former mortgage broker Kerry Buddle has been charged with fraud, while NZF has sold its stake in Mike Pero Mortgages.

Finally, in deposit rates news, a fund manager has described inflation-linked bonds as the true "risk free" asset class in the face of high inflation and low growth.

Niko Kloeten can be contacted at niko@goodreturns.co.nz

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