Govt ignores its own rules: Lee

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Government has made a mockery of its regulation of the financial advice sector with the Mighty River Power shares sale process, says investment adviser Chris Lee.

Tuesday, April 16th 2013, 6:00AM 1 Comment

by Susan Edmunds

He said the regulation of the financial advice sector was meant to focus on giving consumers the right advice for their situations and making sure they got it from qualified people. About 18,000 people had left the industry and there were fewer than 2000 advisers left.  “They put us through all these hoops.”

But he said Mighty River Power sales process had run contrary to all those ideals.

“It’s completely inappropriate to have a campaign saying ‘get on board’. It isn’t appropriate for everyone to buy shares in Mighty River Power.”

Lee said he had heard from people who were using their credit cards to buy shares.  Others had said they would take out a loan of $20,000 to grab their slice.

He called on the Government to get the process right before Meridian came on to the auction block – a float that would be twice the size of Mighty River. “I think everyone who gets advice on Meridian should get it from a financial adviser, not a politician.”

He acknowledged that few of the financial advisers currently operating in the market had come from a background in investing in equities. “Most financial advisers have come out of the insurance industry. Only a very small number have anything much to do with equity markets.”

But he said rather than offer shares only through three lead brokers, as with Mighty River, and alienate smaller advisers, the Government should approach independent advisers and offer them the chance to attend analyst meetings and get up to speed in order to offer Meridian shares to their clients.

“No one is getting any real advice at all.”

Lee said the Government had a fine juggling act on its hands with the Mighty River Power sale. It needed to keep Kiwi investors happy but would also need to keep big foreign investors on-side because they would be needed in a float the size of Meridian.

A fear of not getting the price intention for Meridian would drive the share allocation of Mighty River, he said. If foreign investors did not make money out of Mighty River, they would not be as keen to come back with wallets open again. 

“They’ve got to give as many as possible to New Zealanders but on the other hand, they have to get the best possible price. They want to give people a good experience so they come back again and the easiest way to do that is not to give anything to the institutions but then they won’t invest in Meridian. Managing the conflicting objectives will be a difficult process.”

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