My predictions that Allied Farmers would get its deal on Hanover through the vote today turned out to be correct. However it was a close, very close, call.

After hours counting the votes the key group voted in favour of the deal by just 0.4%. To succeed 75% of Hanover investors had to vote in favour of the deal. The biggest group, Hanover debenture holders said yes with75.4% voted in favour.

The meeting was far more sedate than the moratorium decision meeting a year ago, with fewer investors turning up.

It seems there was a bias in the audience. The anti brigade fronted. The acceptors didn’t.

I suspect part of the reason is that those who wanted to taste the shareholders’ blood are the ones who turned up.

They probably left dissatisfied as shareholder Mark Hotchin wasn’t involved in the meeting too much, and when he was he fronted strongly. Fellow shareholder Eric Watson did a no show leading to accusations he was a “shyster” and “chicken livered”.

What struck me about the meeting (except for how young I felt amongst all these investors) is that emotion over-rode intelligence.

Instead of baying for blood investors should try and be objective and look at the merits of the deal.

Allied, Grant Samuel and others have been straight up and said if investors take shares there is a strong likelihood (I’d say 100%) that the share price will tank in the short to medium term.

Also Allied Farmers MD Rob Alloway, while talking positively, acknowledged the Hanover book was a mess.

The outcome of the meeting swung on the knife edge judging by the performance of some players.

Here we rank how the key players performed – a little like how All Blacks get rated after a test match.

• Meeting chairman; Charles Darlow ; 6 – A solid performance like when he chaired the moratorium meeting. No nonsense, in control and organised. Let himself down by allowing “statements” at the end. Here a group of investors, most with scripted speeches, gave rousing performances extolling investors to vote against the proposal. These statements took the meeting to the knife edge. He shouldn’t have allowed them.
• Hanover chairman, David Henry, 2 – As he acknowledged he isn’t “an elegant speaker”. Ran the risk of putting all the old dears to sleep. His closing comments could have been stronger and more persuasive. Poor performance.
• Allied Farmers managing director, Rob Alloway, 7: Mr Nice Guy. Addressed most people by first name. Wore his heart on his sleeve. If anything too nice.
• Hanover shareholder Mark Hotchin; 8; Couldn’t believe he wasn’t involved in the meeting much until well into the second half when adviser Ton Watson challenged him to put in $20 million cash. Hotchin gave a passionate response, giving a frank assessment of how they first viewed the deal and why it was good for investors. Hotchin doesn’t like public speaking at the best of times, however necessity has seen him develop into a good speaker.

Reserves

• Hanover independent director Des Hammond – Didn’t have too much to do during the meeting, but kept the media at bay when they quizzed Hotchin in the stand up press conference while votes were counted.

Reserve Bank governor Alan Bollard made a remarkable comment at yesterday’s MPS/OCR announcement which stunned me.

He said that at the start of the year New Zealand was in a highly vulnerable position, facing much uncertainty and was surrounded by high risks. We were teetering on the brink.

All it would have taken to bring the country down would have been one irresponsible headline in the media.

Then he thanked the media at the press conference for being responsible and not triggering an economic disaster.

This showed how perilous things were at the start of the year. Secondly, the same couldn’t be said in regards to how the media have handled one of the other big business stories this year.

Those stories were about Hanover and the treatment of shareholder Mark Hotchin.

It has been quite stunning to see what has been happening in some of these investor meetings around the country. Read this piece at the Herald to see an example.

These investors are quite rightly and understandably upset and emotional.

But, in my view they didn’t get to this point by themselves. Their anger has been fuelled by the media, and in particular TV3’s John Campbell and Shareholders Association chairman Bruce Sheppard. The latter in particular has been a disgrace making ill-founded and incorrect comments on prime time telly.

Last night TV One’s Close Up presenter Mark Sainsbury signed off the show acknowledging comments made by Sheppard were false. The media should stop using these rent-a-quote, barrow pushing people as the voices in their stories.

I will defend Hotchin to the point that at least he has had the courage to front up in person to investors. Likewise he and fellow shareholder Eric Watson have come to the party and put additional money into the company, which they didn’t have to do.

We have seen first hand on Good Returns the sort of mob behaviour which has been fuelled by this sensationalist reporting. Some of the comments posted to stories have been unbelievable, highly emotional and in some cases threatening violence. We haven’t approved those comments and they won’t see the light of day. We encourage discussion, but we won’t be part of this orchestrated campaign of hate and vilification.

This whole public debate about commissions is so misguided it’s enough to drive one mad.

For the record, I don’t mind if advisers earn commissions as long as it is disclosed and customers have choice.

Also to get things clear, there are different remuneration structures for the various disciplines of advice, namely; investments, KiwiSaver, mortgages and life insurance.

I think the debate is only about investment products, however it seems that some commentary has included all financial products and services.

With life insurance I tend to agree that remunerating risk advisers on a commission basis is probably the default setting. If you take the argument insurance is sold, not bought, then a commission basis is fine; just disclose it.

Mortgages are similar. There is a slow trend to an advice model here and that is encouraging to see.

Investments are where things get interesting.

This whole idea about banning commissions seems to have come about due to the collapse of various finance companies and perceptions that advisers poured clients into finance companies because of the commission they were paid.

There is a slight element of truth to this. However the big over-riding fact which is being ignored in the debate is this:

The large majority of the money which went into finance companies that collapsed, went in directly from investors. This money did not get there through advisers.

By my reckoning, around a third of the money in collapsed finance companies came through advisers, yet they are getting 100% of the blame.

Banning commissions isn’t the answer. It’s investor education, as I argued here. Also it’s up to the product manufacturers to change the way they reward advisers and the regulators to make sure dodgy operators are closed down.

Yesterday I sat in on an AMP briefing about what it is doing with its advisory business. One of the interesting things was when CEO Jack Regan talked about the attributes needed to be a successful adviser. I won’t list them all, but what is worth noting is that the whole package was wrapped up by acknowledging advisers were sales people; the term used was “professional salesmen”.

Many sales people are remunerated on a commission, or partial commission basis, so why can’t advisers?

Another ignored point which bothers me is around share brokers. Hello, these people have been commission-driven salesmen since Adam was a cowboy. Do they get the same opprobrium as financial advisers?

Nope.

I bet if you looked at many of their portfolios over the past couple of years you will see some significant losses.

Apparently that is OK.

Very strange.