Challenger cans sharebroking idea

The decision has been made because its Australian parent has sold its sharebroking business to fellow broker Bell Potter Securities.

The Australian sale was part of a $20 million cost-cutting program instituted at Challenger since tycoon Kerry Packer joined the board in November.

Challenger New Zealand chief executive John Rowley says the Australian sale "puts the kybosh on us doing it. We were going to plug into their system. It was never going to be a stand-alone. You wouldn’t want to go greenfields in broking in New Zealand at the moment."

Or anywhere else: the worldwide downturn in stock markets, and consequently broking firms’ incomes, was behind the Australian company's decision to quit stock broking.

The New Zealand arm is leveraging off its parent company elsewhere with the launch before Christmas of its High Yield Fund. Essentially a portfolio of Australian fixed interest securities much like capital notes, the fund is currently returning about 10%.

"For a New Zealand investor, it’s a reasonably low risk investment alternative to buying capital notes in the New Zealand market," Rowley says.

But still on the back burner are plans to introduce annuities into New Zealand. That’s even though annuities account for 60% of Challenger’s A$10 billion in funds under management in Australia and is the second largest player in the annuities market there – the New Zealand arm has $200 million in funds under management.

The big problem here is that the giants in the funds management industry, such as AMP, aren’t offering annuities, Rowley says.

"We’ve done a whole lot of work on doing them here but the dilemma we’ve got is that there’s not a market in New Zealand. If AMP tomorrow was a major offeror of annuities, we would do it."

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