FPIA interim chief executive Ross Butler must be a tough man.

As reported on Good Returns this week he has opened discussions with other bodies representing advisers about joining together.
While he wouldn’t name names, one could hazard a guess that the NZ Mortgage Brokers Association would be somewhere near the top of the list.

It is like-minded in wanting to set standards, ethics etc for its members, it has a ceo, and its membership has grown well in recent years.

Plus Ross has been heavily involved in the home loan industry as a director of broking group Mortgage Link.

But one wonders how welcome his advances will be. Anyone knowing a bit of history about this industry will know that “get togethers” (Ross didn’t want to call it a takeover or merger) are fraught with difficulty and politics. Think back to the creation of the FPIA and moves by fund managers and the likes to get together.

The feedback I have had from NZMBA (unofficially) is marriage isn’t on the cards. I guess we will see how good Ross’s flirting and dating skills are!

Thinking about the whys and wherefores, I’ll be interested to learn the logic behind Ross’s move.

And I’ll happily (if somewhat guardedly) throw in this thought.

Under the model proposed by the Task Force on adviser regulation, proper advisers would have to join an Approved Professional Body. It seems to me that instead of one super-APB, that there are more likely to be a raft of smaller, specialised ones which cater to individual disciplines, eg: mortgage broking, sharebroking, investment advice, financial planning and life insurance.

Yes, I have said separate ones for financial planning and life insurance.

This raises the question is it better to try and join up the various associations into one body, or is it better to put the efforts into keeping the various disciplines already together in one organisation together as one?

Then there is the question of competition. Maybe there are others out there who want to establish alternative APBs to the FPIA?
For my money the sleeper in the crowd is the Professional Advisers Association (PAA).

There you go plenty of thoughts on the matter. To close nothing could be more fitting than “Watch this space”.

The cabinet Helen Clark has appointed for the new government is one which the financial services industry could live with quite comfortably.

One of the main appointments I have been interested in is the commerce minister role, as this person will drive the adviser reform process. (Reform mightn’t be the correct word. I always think of reform as fixing something which is broken and advisers aren’t broken).
We always knew that Pete Hodgson was only a caretaker in this role, and we had (correctly) speculated that he would move into health after the election.

Dalziel started the process of looking at the advisory industry, and her immediate successor Margaret Wilson was the one that lit the fuse by setting up the task force.

The talk we hear is that the whole adviser reform process is quite high on the agenda and money has been put aside to move it forward.

The FPIA has signaled that it is preparing to move on becoming an Approved Professional Body. It’s good to see they want to go down this line. The challenge is that no-one knows what an APB will look like or what it will be required to do.

The other appointment of note is in the revenue area. This time around it goes to someone who has been in the role before and has taken an interest in superannuation.

If you haven’t heard the new minister is Peter Dunne.

National’s John Key tried to have a crack at him this week challenging him to dump the proposed plans for tax changes to international investments.

Key labeled them “crazy” and nothing more than a “tax grab”. “The new Revenue Minister should order a review of the capital gains tax as his top priority,” he postulated.

Dunne, to his credit, said he hadn’t got his feet under the desk yet so wasn’t ordering anything. Good old Mr Sensible.

Interested to see this piece in the SST on the weekend about finance brokers not wanting to join an association with a code of ethics and so forth.

We ran a story about this crowd last October.

My question is who really is its audience? It doesn’t seem to be financial planners and mortgage brokers as they are already well-served. (However they potentially get tarred by this article. One person I spoke to thought it said all advisers are dodgy as they wont join an association with a code of ethics).

Back to my question. I recall being told that it was people doing personal loans and debt consolidation. Without wanting to cast a shadow over this complete market sector I would suggest many of these people have no interest in joining such an association.

As mentioned in a previous posting when the Task Force was looking at the advisory industry it came to the conclusion the biggest problem area was people operating on the fringes of the industry.

In my view this guy shouldn’t be blaming others for not joining his association – rather it seems like the market is working.

Investing in fixed interest is the theme of this blog and I picked this topic for several reasons, not to mention that it features in Asset this month.

One is that funds flow is still cascading into income assets. Added to that there are many new fixed-interest investments coming onto the market.

While fixed interest is still the “hot” sector it seems that advisers still need to understand it in more detail as it changes.
One of the more contentious issues within this area is the role of researchers. In our work looking at the issue of research we found that very few people would go on the record about the subject.
Clearly ratings services are slowly starting to become the gatekeepers for funds flow and are starting to influence investment decisions.

Finance companies are loathe to publicly criticise them because it could impact on future ratings.
The evidence for this is more anecdotal, and fits with arguments of some years ago about managed fund ratings when the two research houses in this space were fiercely competing against each other.

A question which has been asked in the managed fund area in the past is equally relevant in the finance company sector now.
Who researches the researchers? Currently anyone can hang out their shingle and call themselves a researcher. They don’t have to have experience and they don’t have to disclose their credentials.
Sound familiar? It’s the same criticism that dogs the advisory industry.

People providing “research” can play a powerful role in the industry. Indeed poor research can have far-reaching consequences as the uninformed public can make potentially costly decisions based on it.

There is an argument that the finance company sector should be subjected to a compulsory ratings regime, just as life insurance companies have to have claims-paying ratings from reputable organisations. There should also be a requirement that finance company researchers are put under the spotlight themselves.

Research around finance companies needs to be done on a qualitative and quantative basis. Currently there are two firms offering ratings solely on a quantative basis and one of them is, in our view, suspect. Its results don’t stack up, there is no track record or experience or expertise in this industry and there is no transparency around its process.

One thing which needs to come out of the government review of the non-bank sector is much tougher rules for people and companies which provide finance company research.