ANZ’s move to acquire the 51% of ING New Zealand it doesn’t already own is no surprise to the market, Goodreturns.co.nz publisher Philip Macalister says.

ING’s Dutch-based parent company has signalled that it wanted to sell assets, meanwhile ANZ, particularly in Australia, needed to pick up speed in the important wealth management market.

The move makes ANZ the biggest KiwiSaver provider in New Zealand with just under a quarter of the market.

A comprehensive survey published by Goodreturns.co.nz this week compared the funds under management for all KiwiSaver providers.

(Read the survey here.)

ING is the most successful overall provider with a total 212,732 members and $523 million (as at March 31) across the four schemes it manages – the ING default scheme, ANZ, National Bank and SIL.

Many questioned whether the ING brand had been damaged beyond repair following all the troubles the fund manager had with its CDO-backed Diversified Yield and Regular Income funds.

In its announcement ANZ says it has negotiated the right to use the ING brand for 12 months.

“The deal today most probably spells the end of the ING brand in New Zealand,” Macalister says.

One of the biggest challenges for ANZ will be to win over the independent financial adviser market.

Currently ING distributes most of its funds and life insurance via the independent adviser market. ANZ doesn’t deal with this market and will need to learn how to manage it to be successful with ING.

Sometimes I am amazed at the advisory industry in New Zealand.

Last week I chose to run a piece from Richard James at NZ Funds Management giving his take on the advisory industry, and some quite candid views.

My thoughts were that it was a good opinion piece from someone meaningful in the industry.

What amazes me is how some in the industry (I can’t use the term profession now) chose to use the piece as an opportunity to attack a range of targets including Money Managers, its founder Doug  Somers-Edgar and NZ Funds.

I have been asked about our policy on comments to Blogs. We do moderate them, and we have chosen to take a fairly liberal view that we shouldn’t “unapprove” comments that we don’t agree with.

The thinking is that we should allow discussion and the exchange of ideas.

Some comments don’t see the light of day for various reasons, such as defamation.

In this instance we haven’t approved (and have removed) some comments.

Why? I’m not prepared to see a positive contribution like this demeaned by advisers who have issues with MM/D S-E/NZ Funds.

It is not a platform for these sorts of comments or for aggrieved parties to spout forth with one side of the story.

It is less of a platform when these contributors don’t disclose all the facts.

Discuss the issues – don’t attack the writer.

ASB fessed up this week that one of its investment advisers has been involved in an elaborate fraud involving millions of dollars. There’s not a huge amount of information about what actually happened but the question I ask is this: Would adviser regulation have stopped this happening?

I think the answer is no.

Despite all the claims about how regulation will make the industry a better place and give investors a greater degree of confidence in the advice sector, it won’t stop this sort of thing happening.

If someone really wants to rip people off they will find a way to do it, no matter what sort of regulations are in place.

What the story does is show what a great advantage bank advisers have over most of the IFA market.

First up, the banks in New Zealand have been good at training and providing professional development for their advisers. In many cases the banks have arguably been the leaders here.

Secondly, investors have a high degree of confidence using a bank adviser, as the companies have the resources behind them to make things good (or at least better) when things go wrong.

While no figures are available with this case, ASB has indicated it had made good where possible. Considering it is a multi-million dollar rip-off, that is probably a not insignificant amount of coin.

This has also been shown at the ANZ over the selling of the ING CDO funds.

And the third thing is that if investors are dissatisfied with the bank advice, they have recourse to the Banking Ombudsman. The ombudsman is an independent body who can rule on complaints and make recommendations, where appropriate, that the bank put things right.

This is a huge advantage for bank advisers. I sometimes wonder if investors thought about this, they wouldn’t be that interested in going to an IFA.

While the Institute of Financial Advisers does have a complaints scheme, it is of no benefit to customers as it doesn’t make rulings whereby the investor receives any payout. Now it appears the institute is the only winner as it makes cost awards against advisers. In one of the more recent cases, and one you will hear more about, an adviser was cleared of some charges but still had costs awarded against her.

Many aspects of regulation are positive. But it’s not the panacea some are painting and it won’t stop fraudulent activities.

With all the news happening around the industry at the moment it sometimes seems a little hard to decide what to focus on.

Over the past week the finance company sector has again dominated the news for a variety of reasons.

One is the government’s not unexpected extension of the guarantee scheme. The other is its announcement on reviewing the rules around moratoria.

Dealing with the second one first it does seem like this is a waste of time. The large majority, if not all, the finance companies which are likely to seek support from their investors for a moratorium, rather than receivership, have wel and truly done so.

It’s unclear to me whether reviewing what has happened is good use of time and resources?

I agree that some of the companies which gained a moratorium arguably should have been put into receivership. However the investors had the choice and the overwhelming majority all voted for the stay of execution.

To me it is little surprise. Human nature indicates that people don’t want to put one of their investments into receivership as it is an admission they made a bad investment. Added to that they are less likely to vote for the big R when an offer of redemption, no matter how good or bad, is put in front of them.

I would add that judging the proposals in today’s environment is not necessarily a reflection of the decision made at the time.

Back to the guarantee scheme. My guess is that the banks will opt out of the guarantee as it won’t stack up on a cost benefit basis.

Banks have been able to reel in millions of term deposit dollars recently and I can’t recall one bank advertising the guarantee as the reason people should invest.

It’s a different story for finance companies. Many have promoted their GG status, and it has helped them enormously.

The big firms will no doubt use the scheme, however it will cost them more as the fee in the new scheme is based on the size of their total book, and not just the amount of money raised after the first GG came into force.

I wonder whether some of the smaller firms will opt in; organisations like credit unions and building societies. My guess is probably not as they haven’t had the same issues as finance companies.

It seems that in this second generation guarantee the rules have been tightened enough to force the much sought after finance company rationalisation to occur.

If this happens and we end up with a strong, well regulated finance company sector, then that is a victory.

I was having a good weekend until Sunday night when I read two politicians publicly getting into the ING CDO debate and arguing the offer made to investors was unfair.

To get straight to the point, this posturing from Peter Dunne and Lianne Dalziel is absolute cheap, political garbage.

I have publicly stated before, and I will say it again: Good on ING and ANZ for fronting up and putting up to $400 million of their own money into this problem. Show me another similar company who has been prepared to do something like this?

You can’t because there isn’t one.

The closest is Hanover.

If the politicians had any interest in investor protection they would have made and enforced rules to stop some of the shonky finance companies even getting off the ground. If they did their job some of the directors of these shonky companies would be in jail now – for a long time.

Jeez the US has already locked Madoff up for the rest of his life. His ponzi scheme came to light well after some of ours fell over.

Dalziel and Dunne have been lawmakers for a long time. One is, and has been, Revenue Minister for some time and the other Commerce Minister.

They could have made a difference. They didn’t.

Today’s announcement makes them look silly.

Around 95% of investors have accepted the ING offer. They knew what they were getting into as there has been ample publicity around the offer and the indemnity.

If it was such a bad deal they had the chance to say no. They haven’t. They had the choice.

As an aside there seems to be some great irony here. If the Frozen Funds group thought it was so bad then they shouldn’t have accepted it. Seems to me the bulk of them have (the only other conclusion is the group’s membership isn’t that big).

Let’s get this argument straight. While the indemnity bit of the offer leaves a lump in the throat, it’s not an unusual offer. If I was the one stumping up with the money I would do the same thing – wouldn’t you?

If you look at all the other carnage out there in the past few years this is the best and the most generous offer put on the table.

These blokes running finance companies still have their flash houses and cars and haven’t offered diddly squat to their debenture holders.

Let’s have a reality check, get politicians to do important things, and move on (and never-ever make a CDO fund again).

This week’s wrap starts with a little promo. Good Returns, New Zealand’s number one news website for advisers, is continually evolving and developing. From today we have added a new function where you can comment on articles. To do this use the comments box at the end of each article.

This is a great way for readers to comment on issues when they arise and give feedback to issues.

Two stories this week which you may like to comment on are the Commerce Commission’s heads-up in its ING funds investigation and the Ministry of Economic Development’s discussion papers on a complaints scheme.

It seems to me that the Commerce Commission announcement that any decisions on whether ING’s frozen funds were mis-sold are months away, and that even if it did think there was mis-selling, action may not be taken giving investors a clear steer on how to vote.

The MED’s proposals on a complaints scheme, and news that many organisations are interested in setting up suitable schemes is one of those necessary discussions. Since we published the story earlier, we have added copies of the discussion documents. You can download both here.

It seems having a robust complaints scheme will be good for the industry. It was interesting to see the latest Financial Knowledge Survey which said that less than 20% of New Zealanders have sought advice.

A couple of our other news stories this week have been strongly investment focused. These include a report on hedging strategies used by New Zealand managers, and also changes to tax rules with international bond funds.

On the life insurance product front we have the latest stats from the Health Funds Association which paint a positive picture of the health insurance market and also Russell Hutchinson asks a question: What is trauma for?

Today we also report that the move to separate the Asia-Pacific life insurance assets of AIG into a new company have taken another step forward.

Another story which you may like to comment on is this one where the ISI suggests the days of commissions are numbered. While the comments relate to investment products, particularly superannuation, one wonders when insurance products will be brought into the argument.

In depositrates.co.nz this week we report on the wind-up of the Auckland Mortgage Trust due to its inability to get a government guarantee, and the Rates Round-Up looks at what is happening with rates and the latest on Fortress Notes.

Have a great weekend.
Philip

Are you sick of hearing about the ING roadshows yet? (If not, have a read of my Blog and one from David Chaplin).

It seems ING can’t stay out of the headlines as the other big story here was news, first reported by Good Returns, that Naomi Ballantyne was stepping down as MD at ING Life. There is a little Blog on the story here, but more importantly comments from readers. If you would like to comment, or post a message to Naomi go to the comments section.

The other ING story yesterday was the Securities Commission putting out a release saying the investors in the DYF and RIF funds need to consider their options carefully before deciding which of the three offers on the table they want to take up.

Another major piece of news on Good Returns is the latest from the Securities Commission on how the advisory industry should be regulated. Our story also has a full copy of the report. This is essential reading for every adviser in the country. You can grab your copy here.

This is a story we will do more on next week, in the meantime if you have any comments or thoughts about what is being proposed, drop me a line at editor@goodreturns.co.nz.

To round off the big stories of the week, you need to see the views from the ISI which say that the days of advisers earning commissions on the sale of investment products are numbered. This is a fascinating story as I suspect it is not as black and white as it appears. It will be interesting to see if all the ISI members agree with this and whether it will extend to life insurance too?

In our People news, besides the Ballantyne departure, we have big changes at AMP Capital, and new advisers at Triplejump and Macquarie.

Late last week we launched a new website covering the home loan market. While Good Returns continues to run home loan rates and news, the new site www.mortgagerates.co.nz has even more information. Included is a wrap on what the economists and experts are saying. The Experts View section is a one-stop-shop for your economic wrap. Have a look at it here.

The good news this week for investment markets was around KiwiSaver performance numbers. FundSource tells us that most KiwiSaver funds are back in the black, and we understand the country’s big saving fund, the NZ Super Fund, also produced some positive figures.

Depositrates.co.nz has had a big week. The most popular story has been one reporting on concerns over cash PIE funds.

We also have a feature, Bond Focus, which examines what is happening in the bond market. Other stories report on PSIS and ING’s funds. You can read them at www.depositrates.co.nz.

Have a great weekend.
Philip

www.goodreturns.co.nz

As a young lad solving the puzzle of the Rubik’s Cube was one of those frustrating things that took me quite a bit of time and effort.

ING’s attempts to solve the puzzle of its CDO-backed funds, DYF and RIF appear to have the same characteristics. Long and slow.

The company’s roadshow around the nation this week, in tandem with its joint venture partner ANZ Bank, has generated plenty of media attention. Seemingly every day there is a new story doing the rounds and each one tries to find a more sensational angle than the last. We’ve had the stories about how much ING NZ boss Helen Troup gets paid, whether the company is for sale and a raft of other stories which appear to be more fiction than fact.

My guess, from what I have seen and heard, is that the Frozen Funds group of dissatisfied investors is behind a lot of this. They remind me of the sort of protest group that turns up at a rally, just for the heck of it. Rent-a-crowd type thing.

I have heard others describe them more like Al-Qaeda in their approach.

Having debate about the offer and what is happening is fine, but it would be nice if the protestors kept to the issue than go off on all sorts of tangents and spread rumours.

You might think I am being a little harsh, possibly I am. These people have suffered a big hit, and many are feeling, rightly or wrongly, they have been duped somewhere along the line.

One of the most sensible comments I have heard all week came from an ING executive who said everyone has to take a look at themselves and accept some blame. ING, ANZ, the regulators, advisers and investors.

I totally agree. What’s more, as the week has gone on ING and ANZ have fronted up (besides with cash) and acknowledged mistakes were made.

It’s about time advisers and investors did the same thing.

I, like many others, have been asked what I think of the offer. My view, (and I am not an investor in these funds because I couldn’t understand them) is that it’s a good one. There are three choices and the cash offer looks pretty attractive. A term deposit at 8.30% is highly attractive and way better than carded rates at the moment. Also the ANZ TD is currently government guaranteed – a fact passed over at present.

The bit about waiving legal rights is a tricky one. From ING and ANZ’s perspective it makes sense and is a reasonable quid pro quo for the amount of money they are putting in. As for the bit about having no guilt attached, that appears to be the reality of these types of commercial deals, love it or loathe it.

If I was an investor I would probably like it because it brings the matter to an end and gives me some certainty.

Holding on for a better offer looks even less likely than winning Big Wednesday this week – it didn’t happen.

Likewise, holding on for rulings from the Securities and Commerce commissions and hoping they make ING and ANZ produce a better offer is something I wouldn’t put a wager on.

However, I would suggest Troup is pretty good at solving the Rubik’s Cube and will have all the squares lined up soon. Some though may be a little battered.

The biggest news for advisers in this year’s Budget was the announcement of nearly $12 million in funding for adviser regulation.

The government made quite a bit of noise about this announcement (well it did have its own press release), but one can’t help thinking that it’s not that big.

Firstly the $12 million is over four years. Secondly the government is saying that from 2012 onwards the regulations will have to be self-funding. That means advisers and companies, and ultimately consumers, will be paying for the protection.

The other thought is that this isn’t that new. The previous government had flagged something similar.

The next point of interest, and something that was unexpected, was the plan to can KiwiSaver mortgage diversion.

The general feedback on this is that it’s an OK move. Not many savers had taken up the option and also with the changes that National made to KiwiSaver late last year in reducing contribution rates it was almost not worth having the ability.

Anyone in KiwiSaver with a mortgage is better to increase their current repayment rates.

I would say that removing the diversion option will remove some of the administrative complexity of KiwiSaver for fund managers and also that mortgage diversion always seemed at odds with the savings regime.

The good news, and it is good news, is that there are no further changes to KiwiSaver. That means the industry can get on with promoting the scheme and educating members. Also it should give advisers confidence in dealing with clients.

The other Budget announcement worth mentioning is the decision to stop contributions to the NZ Super Fund. It is easy to understand the logic, but on the other side one wonders if it is too short-sighted as this is the time to pick up cheap assets. Much of the money investors will make in the medium term will actually be in the short-term.

Of more concern is that this decision will have a significant impact on New Zealand’s capital markets. While many argue not enough of the fund is invested locally, many millions of dollars do go into New Zealand assets. Well they used to until now.

The debate on how our fund managers stack up against those in other countries has certainly seen some polarised views. The one we subscribe to is that the report was a bit harsh, but there is room to improve.

There has been another vein of argument bubbling along which has used this report as a lightening rod to diss all fund managers.

A final thought is this. A couple of the niche managers, and relatively new players in the market, have gone on record saying the rules and practices of the funds management industry are awful and should be changed. Isn’t this a little hypocritical? Why did they want to become fund managers and play in an industry which was so bad? Love to know the answer to that one.

This week’s Blog on the topic has a number of comments including the responses from several fund managers and industry players. Read them here.

Last week I commented on the IFA’s decision to name and shame advisers.This week we have had the IFA defending the decision and the Professional Advisers Association distancing itself from what is happening and urging advisers to make a distinction between itself and the IFA.

To add a little flavour to the debate our Insurance columnist, Russell Hutchinson has waded in with his opinion.

The other big news of the week, which Good Returns was the first to report, is that Sovereign’’s managing director Simon Blair is leaving our shores. Details in People.

Today’s story is a take on investment markets from GAM’’s Asia Pacific boss, Helen Ng. Her view, which is explained here, is that equities are still a risk, but don’t rule them out.

Other investment news this week is an update on tougher rules for the non–bank sector, BNZ entering the market to raise another $150 million and our regular Rates Round Up.

The Insurance news section has been busy too, with the Newpark/PIS deal off again. Our story here has views from both camps and they seem to be telling different stories.

We have an update on what is happening at AIG Life. The IPO is progressing and it seems the company in New Zealand is going back to the AIA brand.

Also this week is our latest monthly column from AXA:

Trauma insurance – life insurance for the living

Trauma or critical illness cover is one of the life insurance industry’s best kept secrets.

Have a great weekend.

Philip