Napier based financial planner John Sumner is "appalled" that Tower gave all of its $125 million capital bond issue to sharebrokers to sell, and none to advisers who support the company's managed fund business.
"Tower is not supporting those who have supported them over the years," he says.
Sumner uses a range of investments for his clients including managed funds, shares and bonds and says he has been loyal to Tower by supporting its index funds and the GAM Multi-Trading fund.
He says the capital note issue is something that would be good in his clients’ portfolios, however he can’t get any it.
"I would have liked the opportunity to use some of Tower's capital bond for existing fee paying clients. Instead I have been shut out all together."
He says he has been unable to get an allocation through three brokers he has tried.
"I will no longer support Tower on this basis. This is a total lack of respect for me as an investment adviser," Sumner says.
Tower Managed Funds chief executive Jim Minto is surprised that Sumner can’t get any of the bonds as "there’s plenty of this stuff out there."
He says it would have been a nice thing to allocate some of the issue to advisers, but it was not a decision for TMF.
He points out that the bond issue is a matter of capital raising for the company, Tower Corporation, as opposed to one of selling managed funds through Tower Managed Funds.
One of the other issues, he says, is that if Tower had set aside a pool for advisers, the company would effectively have had to take the risk of underwriting that pool.
Minto says with issues like this it is a matter of balancing the interests of all Tower’s stakeholders including shareholders, staff and distributors.
He says some consideration was given to allocating bonds to advisers, however the company decided to treat the issue in the same way as its issue of shares a couple of years ago.
ABN Amro Craigs managing director Neil Craig says one of the problems has been that the issue isn’t particularly big, and a large proportion, $25 million, has been allocated to Tower shareholders.
Also as lead broker ABN Amro Craigs had to allocate bonds to the three co-brokers, plus enough had to be put aside for institutional investors.
"There’s not a lot left over for other retail brokers and financial planners."
He says not a lot of financial planners are interested in products like this and 98% of past issues have been sold through members of the stock exchange.
Financial planners should have a relationship with a broker, and that broker should be able to access new issues like this, he says.
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