South Canterbury Finance’s demise, and this may seem odd, was a little bit of a surprise.

Sure there were the regular commentary crowd baying for a receivership. They are a bit like the peasants in the old days wanting to see people hung, drawn and quartered, a beheading or simply someone being thrown to the tigers.

Well they got their head this time.

Many thought the company was too big to fail. That’s now history the receivers have been called in.

I’d argue though that SCF’s collapse is not like most of the other failed finance companies. (For a start it’s bigger!)

Most of the failed companies were dodgy. The growing list of legal action is testament to this.

Was SCF dodgy in the same way? Arguably not. It certainly wasn’t run by the nouveau riche in Auckland, the white shoe brigade or the dodgy dealers.

It’s one, as Carmel Fisher noted on Larry William’s Newstalk business programme, that has stirred emotions and pitched many groups against each other.

But we need to cut through the emotion.

The questions which, for me, linger around SCF are firstly its openness. The company has never, until recently, been transparent. It has always refused to provide information to people.

One of the best examples is the research project FundSource tried to establish. It wanted to understand the finance company sector and get companies to voluntarily disclose pertinent information.

SCF always refused.

This was either arrogance or management trying to hide what it was doing.

Secondly, blame must be sheeted home to some of the management. CEO Sandy Maier was interesting on Campbell Live last night when he described some of the lending practices of the company, especially when money came flooding in under the government guarantee as “cyclical excesses and rushes to the head”.

Former CEO Lachie McLeod should be called to account for the company under his watch as it appears that is when most of the damage to this 80-plus year old firm took hold.

The third point, and one perhaps is the most worrying, is comments around how the Hubbard businesses were run. According to the Statutory Managers Mr and Mrs Hubbard weren’t likely to win any best practice awards for their back office systems.

However Prime Minister John Key made a comment that administration wasn’t much better at SCF. Surely this is something management should have sorted and ratings agencies like Standard and Poors’ should have been all over.

While the “commentators” were baying for blood it seemed that SCF was nearly too big to fail and that the political fallout would have been too great for this government.

Well that was wrong. Receivership may well be the best option, particularly because the assets are relatively good (compared to other failed finance companies).

Don’t be surprised to see a deal done quickly where some of the assets are on-sold.

As for the government. Well it has handled the collapse pretty well. Writing a $1.6 billion cheque on the spot is a pretty good effort. Investors should be happy (enough) and it is a smart move that the government has essentially taken over the company. (As an aside it is now a finance company – in wind down – and it maybe some sort of political omen).

Whether it has handled the statutory management process well and what effect that had on SCF’s demise is another matter.

Making sense of the government’s oddly-named Savings Working Group is something which is not that easy; nor is it easy to understand the reasoning behind it.

With a name like Savings Working Group you’d be forgiven for thinking that it is all about personal savings. You’d think it would be all about making New Zealanders save sufficient capital for a decent retirement.

Well that’s not the case. Finance Minister Bill English made it very clear to me that this group was mainly focused on looking at reducing the amount of money we as a nation borrow.

That’s a good thing. The numbers and the story around this suggests it is an important issue.

I wonder whether it is really a savings issue, as the name of the working group suggests. Added to that our offshore borrowings are made up of government, private sector and business and household borrowings.

The first one is something English and his government need to deal with. One could argue it is doing that and that on an international basis New Zealand’s government borrowing as a percentage of GDP is actually quite low.

Statistics NZ says that net core crown debt at June 30 was forecast to be $26.5 billion. If there was no change in net international liabilities in the three months ended June, government  debt would be just 15.9% of total net debt.

That brings into sharp relief the business sector. On this point you have to wonder how the government, especially one which believes in economic freedom and international markets is going to address this. Surely the government believes in free markets and the freedom of capital and labour to move globally? To try and stop New Zealand businesses borrowing overseas seems oddly contradictory to National party idealogy?

On the household sector the main part of this borrowing is the money we lend from banks to fund property investment and other things. With the Reserve Bank introducing the Core Funding Ratio and forcing banks to source more of their funds locally we must already be on the way to reducing our foreign borrowings?

Some comments from Statistics New Zealand suggest we maybe on the right track to fixing this offshore borrowing issue. It says:

“Overseas debt with a time to maturity of one year or less was 40.4% of the total at 31 March 2010, a decrease compared with 44.3% at 31 December 2009, and 43.0% at 31 March 2009. This was the lowest level since the time series began at June 2000. In general, overseas debt with a time to maturity of one year or less as a proportion of total overseas debt has been trending down from 31 March 2008. This is consistent with the Reserve Bank of New Zealand’s Prudential Liquidity Policy for banks which requires banks to hold longer-term foreign funding.” — Statistics New Zealand.

Back to retirement savings issues. It’s good that saving for retirement is not the group’s focus. Why? Well the government has taken off the table many of the key issues that need to be discussed. These issues relate to New Zealand Superannuation, the age of eligibility, even the rules around eligibility and the quantum of pension payments.

These are vital issues that need to be discussed and debated. Unfortunately this government is to gutless to address them.

The SWG has been given a bit of a brief to look at things like KiwiSaver and tax. What is interesting here is that these issues have already been debated at length and there is plenty of information out there.
Surely there is enough information for a government to make some policy decisions – as they should be doing, so why another taskforce?

This government has shown a predilection for these task forces. Generally they come out with some “radical” suggestions to start with then tone their comments down as they go along.

This group is likely to do just that. It’s likely to include comments around personal savings, although its main focus is elsewhere. Then the government will use its focus groups and polls to see what it can get away with.

I suspect English sees an opening for making some changes which previously he believed he couldn’t get away with.

Maybe the SWG is really some sort of Trojan Horse. We will find out in time for Christmas as the group is due to report then. Very suspicious!

One of the stories that has interested me in the past couple of weeks is around the types of investment products we should have for retirees.

The need for these sorts of products is, if you believe we need them, only a couple of years ago.

Jack Regan at AMP pointed out yesterday that in two and a half years’ time people will be at the point where they can start taking money out of KiwiSaver. Some of the figures being bandied around show that the sums involved run into the hundreds of millions of dollars. This is no surprise when you look at the age distribution of KiwiSaver members.

Figures show that the two main areas of concentration are children and young workers, along with the pre-retiree cohort.

Years ago I was a fan of annuities, but it seems getting that market going is pretty much impossible at the moment. One drawback is tax. The other is building up some sort of critical mass.

Maybe there isn’t a need for special products for this part of the market, rather retirees should just have a good fixed interest portfolio.

A couple of recent comments and stories illustrate that putting such a portfolio together isn’t that easy.

Rob Stock in the Sunday Star Times highlighted some of the problems in this area. Likewise, a discussion with some, what I would call, intelligent investors in Auckland recently reinforced the theme putting fixed interest portfolios together properly can be hard.

Their two concerns were perpetual securities where investors don’t really have much of an out, and reset securities. The basic argument here being when rates rise the issuer will buy them back as they become an expensive funding line and therefore investors miss out.

Overarching all this is that debt offerings often don’t provide enough return for the risk.
That, though, has been a common problem.

New Plymouth-based adviser Peter Hensley has written a “white paper” on the issue of suitable products and it’s worth reading. If you haven’t seen it you can read a copy here.

A couple of points he makes is that other countries have dealt with this issue are there are a range of products available. New Zealand is one market which hasn’t addressed this issue.

What is worrisome is that, although many people agree there is an issue, little appears to be happening.

I suggest time is running out and we need to look at solutions for clients, especially those who become eligible to take money from KiwiSaver.

Hopefully the stories we have run, and the comments so far, will help create some debate around this area. (In that sense it has been pleasing to read these comments.)

ANZ announced the new name for its ING business yesterday and it certainly had got readers commenting.

If you haven’t caught up with things the new name is OnePath.

The range of views on the name is quite diverse and some aren’t that complimentary (also I should disclose a few haven’t see the light of day either).

I’ve always wondered about how these big corporates come up with new names. My wondering continues. Companies can get great at telling a story around how a name is developed and what it stands for.

One of the best was actually Royal & SunAlliance when it became Asteron. They had this massive multi-city Australasian event where every venue tuned into the main event in Sydney (I think). They had all these images which explained the “emotions” behind the brand.

It was a well told story, but now do I remember any of the images or see them around? Nope.

Bridgecorp did the same thing. You may recall it had all these cute little images which were meant to symbolise important values?

Clearly it didn’t work. It certainly didn’t work on the staff. At one conference their BDM Andy Harris got up in front of the audience and ended up with these cutesy images on the screen and even he didn’t know what they stood for!

“Oh it’s some stuff marketing come up with,” he said (or words similar to that – probably a little more expressive).

One of the curious things with Onepath is that many of the names we see these days are made up words. Fonterra, Zespri, Cervena etc I always thought at the time how naff these names are, but history shows they have become accepted and you don’t hear too much criticism.

Onepath seems different as it is made up of two, common, words and has some meaning already.

Hopefully when the company takes you down one path to riches and protection it is the right path!

Likewise I always thought financial services companies and advisers had lots of paths for their clients and they had to tailor the journey for the client?

But then again I wonder what’s in a name? I recall years ago going on a junket to Christchurch when Infratil was being launched. We checked out these assets the company owned and one night had a discussion about what the name meant.

I recall Lloyd Morrison saying the name didn’t matter. It’s what the company does which counts.