There will be plenty of naysayers telling Hanover investors why they should tip the company into receivership (most of them funnily enough with first names starting with B).

I thought I’d give you seven reasons why the deal will go ahead.

1. No one likes admitting to failure. Investors have shown they are reluctant to put a company they backed under. It’s like they are admitting they made a mistake. Remember the majority of investors who put their money into Hanover and United did it off their own volition – not through advisers.
2. They voted in hope for the moratorium and they will do the same again with Allied Farmers.
3. It’s a way of saying goodbye to Hanover shareholder Mark Hotchin and Eric Watson. Nothing like a public humiliation to make one feel better.
4. Instead they replace them with the new Mr Nice Guy Rob Alloway.
5. At least it’s a way out. Currently investors are stuck in the moratorium. They can’t do anything and it seems Hanover is pretty hamstrung too.
6. Allied Farmers needs the deal as much, if not more then Hanover. Remember they are the ones who initiated it. They need the capital and the size. Without this deal its future in the finance business is less than rosy.
7. Investors with a medium to long term view may well see the deal stacks up. Hanover’s books don’t look particularly good in the light of the today’s economic environment. But markets go in cycles and no doubt somewhere, sometime the picture could well change.

Sure I may be wrong, but hey even the Independent Report suggests receivership isn’t all it is cracked up to be.

Boy, the initial reaction to the Hanover/Allied deal was hostile from some quarters. I have to say I have been surprised by some of the comments aired over the deal.

Yes it should be no surprise to see some negative reaction, particularly as in some quarters it was portrayed as a get out of jail free card for Eric Watson and Mark Hotchin – and some tried to make a story that they personally were going to benefit.

It is good to see a range of comments, but please, no one listen to Bruce Shepherd. He made it clear last year what his views were on Hanover and it seems he is emotionally involved and not particularly objective.

Some of the things he has said are blatantly incorrect and designed to mislead. I said in a Blog ages ago that maybe it is time there was a change of leadership at the Shareholders’ Association, and recent events have reinforced that view.

After reading Paul Holmes’ piece on Sunday my eyes weren’t just rolling round in my head they had popped out of their sockets. This guy is someone people look up to and listen to. Surely he could have got his facts right first. He proudly admits to being totally ignorant about investment finance so maybe he should have steered clear of the subject or done some proper research.

Coming back to the Allied/Hanover deal. In days subsequent to the announcement the attitude and commentary has changed. I note Brian Gaynor’s piece in the Saturday Herald as one example.

That is good, as investors need to make intelligent informed decisions, not emotional ones.

This is even more important as trying to make sense of whether it is a good deal or not is difficult because it is so complex and we are still to see the details and fine print of the deal.

I’ve been leaning on the positive side  of it and if the story today, that another competing bid may emerge, suggests that the deal has some merit and may be the catalyst for a better one.

When the moratorium proposal was being discussed it seemed to me sensible that the Hanover loan book was managed by the company rather than receivers. However, that is partially wrong. All the good people in this area have left Hanover and the book probably isn’t being managed as well as it could be.

Having a new bunch of managers at Allied running the book and trying to manage it to successful outcomes is a better idea.

I prefer it to receivers. The view I expressed to someone recently was that if receivers got their hands on the book last year and tried to realise it investors would be lucky to get 20c in the dollar. The market’s been at rock bottom, there are no buyers, no finance and many of the Hanover loans are second mortgages which in this market are next to worthless.

Markets go in cycles and if the book can be managed through the troughs then some much better outcomes are likely.

Whether the deal will go through is a moot point as there are so many stakeholders. My guess is that getting it through the Allied vote could be the hardest.

At this stage it seems there are some winners, particularly the likes of Hanover Capital investors. The Allied shareholders seem protected; Allied Nationwide investors get a stronger company and that leaves the biggest group: Hanover and United debenture holders. They have to decide whether becoming shareholders in Allied is better than having, frozen Hanover debentures being repaid on a long, slow, drip feed basis.

With all the controversy of the advisory industry I thought it would be worth recording some thoughts on what is going on at the moment.

There is a feeling that any control or input advisers had over their coming regulation has totally disappeared.

Last week’s sacking of two advisers from the Code Committee affirms this notion strongly for me. Especially as there are no plans to replace them on the committee.

Also former AIA New Zealand boss David Whyte made a lengthy comment on the article last week which had some salient points.

One he made was any thoughts of co-regulation of the advisory industry are long gone.

He also made some very interesting points about the Consumer survey of advisers and why it was flawed.

There is a feeling the survey had a pre-determined outcome; if so it achieved them.

IFA president Lyn McMorran said in an email to members yesterday it used “sensationalist” – that no one would really argue with.

However I have also heard the language in the draft sent out for review and the final published work was vastly different.

With regards to the sacking of Patrick Middleton and Liz Koh, I’d have to say that the Commissioner of Financial Advisers, Annabel Cotton, has over-reacted.

One argument put to me is that if these two were forced to fall on their swords, then anyone associated with any of the firms which “failed” the Consumer survey should not hold high office. This argument would capture people like McMorran.

Clearly that doesn’t make sense; just like the Code Committee sackings make little sense.

I doubt many people had linked the Code Committee members with the survey and surely it would have been possible to defend them if the situation ever developed that far? Both are well-regarded members of the advisory community and no doubt provided valuable input into drafting the regulations.

You really do have to wonder whose interests are being served by the Consumer survey of financial advisers released yesterday.

The release had all the hallmarks of a well-orchestrated media campaign. Some key media were given special treatment and advance copies of the survey and interviews on radio and television were jacked up well before the official release.

All common PR tactics to gain maximum exposure.

What is hard to understand is why do such a survey of advisers now when the industry is on the verge of a new regulatory regime designed to help increase confidence in the sector?

The survey does the total opposite. It’s like spending money to fix an old washing machine when you are in the process of buying a new one.

Consumer is clearly using this to drive more sales of its magazine. As a publisher you know topics which will generate reader interest and sales. The womens’ magazines do this cynically each week with the celebs they put on the covers. We, too, know the sorts of topics which will generate reader interest and make sure we maximise readership from them.

The Retirement Commission’s role is questionable too. Surely it should be helping improve the advice sector?

Looking at its role, it was one of the funders of the survey and its response has been to use the survey to promote a new service it is about to launch. Have a read of its release here.

It looks like they don’t want people to use advisers, rather they would rather New Zealanders become DIY investors using its website.

Then there is the Securities Commission, who was another funder of the survey. Surely it too should be trying to move the sector forward rather than clobbering it?

The IFA wasn’t a funder, in fact it appears to have not had much involvement other than nominating a couple of advisers for the survey panel. Indeed it hasn’t, to our knowledge, put out any statement. The president appears to be unavailable. The CEO, who you would expect to front, doesn’t. Instead it is left up to the chairman – who happens to be the husband of the Securities Commission boss Jane Diplock.

The most interesting thing we have learnt from the survey is that Consumer chief executive Sue Chetwin lives with a sharebroker. Wonder what sort of advice she gets?