Expect to see a huge brouhaha next week over tax – this time though it won’t be about income tax cuts, but a discussion document proposing a capital gains tax on offshore managed funds.

The trigger for this will be a discussion document proposing that offshore-based funds are taxed under a comparative value method. The paper is being produced as the government has rejected the risk-free rate of return idea put forward last year by Craig Stobo.

Here’s what’s likely to be in the discussion document:

• Tax all offshore-based funds on a comparative value basis
• The tax rate will be on 100% on the change in comparative value of the funds
• Abolition of the grey list
• Have a threshold for individual investors. Investors below this level will be taxed only on dividends.

The big debate leading up to this discussion document has been about what level should the tax kick in at?

Since no one I have spoken to has come up with any compelling or consistent arguments to support a level of less than 100%. Don’t be surprised if the paper suggests all the change in comparative value should be taxed.

Investors in domestic funds will be subject to a different approach. They will be treated on a flow-through basis and be taxed at their own marginal tax rate.

Such a move will create a huge home bias for investors – which apparently officials are comfortable with.

That’s a really odd position to take when you think about the NZ Superannuation Fund. This fund is mandated to maximise returns without undue risk to the fund.

Its conclusion was that to achieve this objective it needed to invest the bulk of its money offshore into shares.

While the industry will be big in their opposition to this discussion paper, I understand that National Party leader, Don Brash, and finance spokesman John Key, are gearing up to go big on this too.

I wouldn’t be surprised to see the changes to New Zealand based funds made by the due date, but changes to international funds pushed back.

I spent most of last week down in Christchurch at the FPIA Conference which, as usual, was interesting and it was great to catch up with people in the industry. We will, during the next few weeks, publish stories from some of the more interesting presentations. The lighter stuff is for the Blog…starting with…

The biggest faux pas was undoubtedly scheduling the convention dinner on the same night as the Lions v Wellington rugby game.

When news filtered out that dinner could be big screenless, the appeal of the local bars was too great for many. With the possibility that not too many males were going to front for dinner some quick planning was required. (A female only financial planning dinner would only require a phone box, not a town hall in a major city).

With a bit of a mad scramble – and no doubt a few thousand dollars – Sky was hooked up that day and the footie showed at the dinner.

The irony of this was that dinner was sponsored by Strategic Finance which is run by none other than the NZ Rugby Football Union boss Jock Hobbs (a Wellingtonian to boot).

While we’re on the subject of priorities what’s more important? Tea and scones or the chance to put direct questions to the chairman of the task force on adviser regulation?

I thought I knew the answer but was proved wrong. Task force chair Michael Webb made an interesting presentation to the conference on Thursday morning – and I suspect that was a big draw card for many. He raised lots of interesting ideas including one that advisers send their clients a statement every six months showing them how much commission they have received.

However, because the two earlier sessions – one from an Australian chocolate maker – went over time, MC Bob Parker told the assembled masses there was no time to ask Webb questions – rather everyone should leave the Town Hall and head over to the convention centre for morning tea. Bad call Bob.

(As a side note the Australian chocolate maker was good!)

I’ve been meaning to write a post on people for a few days – and sitting here watching Six Feet Under is the perfect time.
News that Palmerston North-based adviser John Doolan has been killed in a cycling accident is premature.
Thanks to my friends in Balmy Palmy I now have evidence that Mr Doolan is is still with us!

In other people news I had an interesting chat with Bernie McCrea the other day. Bernie is no longer with AIA, after five and a half years with the company. While the company originally said that Bernie was stepping aside from the GM’s role to take on “a new distributional role, the exact nature of which is yet to be determined” he has actually left.
He tells me it was amicable and by agreement – and I have no doubt it was. (Never said it wasn’t).
As I said before it is sad to see a guy suddenly leave a business when he has led it through a very good period. Bernie got some good runs on the board and has always been a good guy to deal with. I wish him well.
What I am really love is some of these beat-up stories about “the record been set straight” ra-ra. What a beat up.

The Task Force held its first two public meeting in Auckland and Hamilton today. I understand there was a reasonable turn out in Auckland – around 40 people and mainly advisers.

My sources tell me that mainly financial planners and insurance advisers attended the meetings – mortgage brokers weren’t to be found and there were only a few members of the public.

I guess many of the more senior mortgage broker figures are in Australia and the Mortgage Industry Association annual gabfest.

The Task Force is in Tauranga tomorrow so will whip over there to hear what they have to say and report back. Good to see the FPIA’s BoP branch encouraging its members to attend.

Sticking with the Task Force I was interested to read this piece the other day http://www.stuff.co.nz/stuff/0,2106,3297172a11,00.html regarding what the government is doing with builders.

Think about it in terms of financial advisers. Read the story and change builder to financial adviser and think: Would I be happy with this sort of regulation of my business?

As I suggested in an ASSET editorial a while back the government is looking at regulating a number of occupations and what it does in other areas may give us a clue where it may head with the advisory industry.

It seems to me there is a far bit of complacency about the Task Force report at the moment.

Again I understand ING has been asking advisers at its mid-winter roadshow how many of them have read the Task Force’s Options Paper. In each of the first few locations only a handful of people have put up their hands.

Consequently ING’s distribution manager Boris Becker has given advisers a good old wind up and told them to engage.

Of course you can engage here http://www.assetmagazine.co.nz