A friend was recently in China and on his return he sent me a copy of an article he clipped out of the China Daily newspaper about how other countries treat advisers.

The story is fascinating: A female retiree was sentenced to a provisional death penalty for effectively giving shonky investment advice.

She was convicted of embezzling more than US$2 million from 180 “trusting victims”.

Apparently she got people to hand over their savings which were put into stocks and the futures market.

And just to show how important education is, I’ll quote this part of the article: “Yu assured investors she was university-trained in finance, though her schooling ended in middle school.”

The paper reports she was offering annual interest rates of between 12 and 30%. (Too good to be true? Plenty of offers in the New Zealand market offering these sorts of returns).

It also reports “Yu strangely expressed her dissatisfaction with the ruling.”

Read the article here

Had an interesting discussion with one of the members of the Task Force looking at the regulation of financial intermediaries.

It seems that the Minister of Commerce, Pete Hodgson, is going to get the report at the end of the month, but he has been well-briefed on what is being proposed.

According to a Ministry of Economic Development timeline the report is likely to be publicly released a week later complete with a government response.

This is similar to what the government has done with other reports.

What is interesting about the Task Force is that the problems in the “advisory” industry aren’t so much with what readers of Good Returns would consider the mainstream advice industry.

Rather the problems exist in the budget advisory/debt consolidation area where vulnerable people are direct crediting their wages to these “advisers” who manage their finances but charge pretty hefty interest rates.

Also some comments are being made that people in the mortgage broking space need to lift their game and understand the risks of what they are advising on.

This Task Force member made the observation that there was a far lower degree of discussion and input into the process than he expected. This is a view that I have commented on a number of times before, but I guess it is too late to have another go at the apathy shown by advisers to this issue.

(One comment made by this Task Force member was the valuable input from the FPIA. He says the exercise would not have been as successful as it has been without the association’s involvement).

The big worry point now is that the Task Force’s report is going to get shelved as has happened with the Law Commission report on Life Insurance.

One issue is that the current Minister of Commerce is unlikely to be in this job following the election (either he will be in opposition or another portfolio) and a new minister may not make this issue a high priority.

Also there is the non-bank finance sector review to think about (for more details read this press release).

This review hasn’t received as much publicity as it deserves. But when you look at it and how it has superceded the Law Commission report on life insurance (see this story) then there is the distinct possibly the Task Force report will be put on hold.

Let’s make sure this doesn’t happen.

One of the more interesting press releases recently – and one which didn’t get a lot of mention was this one from the NZ Superannuation Fund.

Essentially the guardian of our money dumped one of its managers and replaced it with another.

The manager in question, which most of us never would have heard of, looked after $120 million in the emerging markets area.

To me it illustrates a couple of things. One is the people in a fund management firm are its most important assets – you’ve heard all the clichés about intellectual capital going up and down in the lift each day.

Over the years I have observed that when a key person or people leaves a firm, it often struggles to a) keep money and b) maintain performance.

This, obviously, is a general rule. There are some crowds that have managed to keep things reasonably together when people move.

The other thing is how winning an NZ Super mandate isn’t a job for life. Managers I have spoken to say the due diligence process is exhaustive. And from what we have heard it isn’t necessarily a high paying job. The NZ Super Fund is tight on fees, yet many of these businesses have to pay the price of ramping up their organisation.

Another issue is the image/brand issues. Many managers who have won mandates are understandably proud and use it to help grow their businesses.

However, the dumping of a high profile, or well-known manager in the New Zealand market would be a minor credibility crisis – no doubt it will get more attention than this recent sacking.

The end of last week was busy with lots of foreigners (eg: offshore fund managers) in town, coincidentally when the third Lions test was on.

That and a chance meeting with Asteron boss Sean Carroll in the Vero Buidling got me thinking about rugby.

One interesting observation is the difference in companies which get behind sports teams. In New Zealand our team, the ABs, are sponsored by breweries, but the Lions have their major backing from financial services companies.

Does that say something about us and also the state of the savings industry in New Zealand?

The closest we come to a financial services organisation getting behind an event is AXA’s sponsorship of the Wellington Sevens. It would be interesting to know how successful that is and whether it will continue.

From memory the deal came about when someone who was on the Wellington Rugby Football Union board was also marketing manager at AXA. She has now left and AXA has a new ceo.

Maybe AXA will stay involved as the next World Cup is in France.

Back to Sean – as this pic shows he is proud to support his home team. But maybe it is a subtle sign that Asteron may end up involved in some sort of industry rationalisation?

While I was thinking about this I came across another idea on Russell’s Moneyblog

I bought a new car the other day and driving it along last night made me think that it provides quite a good similie for the savings industry.

The old car was a beat up Nissan Sentra which had served us well and was functional but highly unlikely to turn heads – except maybe the panel beaters!

The new mobile is a pretty sexy Citreon C4 which is smart (does all sorts of things automatically) is good looking and popular.

Maybe, I thought, this is what the savings industry needs – a good makeover for the products and services. After all a couple of product providers told me yesterday that fewer and fewer advisers are using what they make.

What also got me thinking was that some of the names we have used in the past to describe bits of the savings industry need to change.

A while back banks and the like started calling savings products wealth management products. I thought this was a bit dorky, and pretentious. Now I have second thoughts.

Another change is managed funds. Craig Stobo started calling them collective investment vehicles (CIVs). Maybe that is a better option than managed funds and will help create a new, positive, image.

In the United Kingdom a while back the investment trust company industry pooled their resources and started some generic promotion of their products and their benefits with the ITS campaign. It made investment trusts hip and more attractive.

Is this something the CIV industry could do in New Zealand?

But back to my car – I like driving it, and it makes me feel good (plus it gets me from A to B). That’s what the savings industry needs to do.

PS: There is some dispute in the family over whose car it is!

A couple of interesting bits of news around the place seem to point to the likelihood that Macquarie will get into the rest home business.

Macquarie has established a retirement village company, Retirement Care (NZ) Ltd on June 30. The company’s shareholder is Macquarie International Investments Pty Ltd

In the Herald the other day there was as story about church and religious groups selling their rest homes in Auckland. The new ownership of some, but not all, was accounted for.

Maybe Macquarie is the buyer?

Don’t be surprised to see the company launch a listed retirement village company.

Looking at how some of the other listed players have gone recently it isn’t a bad business to be in.

Macquarie are not the only big player getting into this area – as reported earlier – AMP have become involved through Vision Senior Living.