The credit crunch is pretty horrible and sad (especially if you or your clients are exposed to it), but you can have a laugh too.

Over recent weeks we have been sent a number of humorous takes on how the credit markets work, from a ditty to the lyrics of a Queen song, through to a very funny slide show.

View the slide show here.

The announcement last week of a strategic alliance between the IFA and the NZ Mortgage Brokers Association was both unexpected and fascinating.

At a high level one must congratulate two adviser associations for working together.

But, and there is always a but, it begs some questions.

The most obvious is, was this alliance done for the right reasons? Or was it done for political purposes?

There is a whiff of political purpose around this. Why? The Professional Advisers Association (PAA) has been quite open about its desire to grow its membership. It has suggested to life advisers within the IFA that it is the natural home for them, and currently it is running a series of roadshows offering mortgage brokers an alternative home.

One way for the IFA and NZMBA to neutralise the PAA was to form an alliance. To me it was a surprise, considering some of the events and comments of recent years.

A view I have expressed previously is that if two associations were to combine, the most obvious was the PAA and NZMBA. I believe life insurance and mortgage broking are more closely aligned disciplines than investment and either of the others.

However, I am aware of significant tension between the PAA and NZMBA which is proving difficult to release.

The other obvious alliance was the PAA and the Life Brokers Association (LBA), however the IFA successful scuttled that last year.

All this leads me to the following conclusion. Competition between associations in the quest to be the biggest adviser association is counter-productive.

I believe the government should review its approach to adviser regulation and move away from the idea of having multiple Approved Professional Bodies. There should be just one for all advisers. The government – or an agency like the Securities Commission – should set it up with help from all adviser associations, and then it should be left to the industry to run.

Under the current model there will be multiple bodies, that isn’t cost-effective, doesn’t build uniform standards in the industry and is counterproductive.

Plenty of other industries and professions have just one licensing body, why can’t the same rules apply in financial advice?

As I mentioned in today’s Weekly Wrap the indefinite closure of ING’s credit funds is likely to galvanise attention onto this sector of the market and away from finance companies (unless we have another big one fall over).

All these credit products have been having trouble for a while and what is possibly not recognised is the amount of money in these products, or the size of the hits being taken.

The list of firms who played in this space is lengthy and filled with some well-respected brands. Besides ING, there is Macquarie, NZ Funds, Absolute Capital, Forsyth Barr and Basis Capital. In total, there is many hundreds of millions of dollars.

Up until now the status of the listed funds such as Macquarie’s Fortress, Absolute Capital’s PINS funds and others, has been apparent. The ING announcement this week brings the unlisted offerings into the light.

One comment made to me yesterday was worrying. It was from someone with a quasi-finance company type product, and he said to the public all these things look the same. That is, the public doesn’t make much of a distinction between credit funds and finance companies.

That doesn’t surprise me as it had been clear for sometime than many of these credit funds were sold as alternatives to finance companies and in many cases term deposits.

In the early days many stories were told that ANZ had been selling credit funds to customers who wanted term deposits. This is a worrying story that has been sitting below the surface for some time now. In reading today’s Business Herald it is clear that the story will gain prominence.

Judging from the mainstream media reports, the credit fund issues maybe dealt with in the same manner as finance companies.

If there is a plus to this, this is it. I imagine most of the money that went into credit funds was adviser-directed. Consequently, the client should have a well-diversified portfolio and credit funds will only have a small allocation, as opposed to the horror stories we have heard of punters having all their money spread across three or four of the worst finance companies.

Let’s hope I’m right on that!