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PAA attempts holiday homes vote 2.0

The PAA is taking its Holiday Home Legacy Trust deed to a vote again next week – but some members are still not happy.

Wednesday, May 30th 2018, 6:00AM 6 Comments

by Susan Edmunds

The association’s members, including its own board, voted against the first version of the trust deed in December.

The trust was set up to handle the almost $2 million of proceeds of the sale of the PAA’s holiday homes. About half a million dollars has already been refunded to members who had contributed to the scheme in return for credits.

The next vote will take place on Friday week.

Adviser Geoff Wilson said not enough was being done to look after those advisers who had helped to contribute to the trust's millions.

“The PAA owned the houses and the members owned the credits then when the PAA sold the houses we were left with credits we could no longer use.

“The trust title is PAA Holiday Homes Legacy Trust. But there is no legacy available for members of the holiday home scheme. The title is a sham, and a weak effort to salve the guilty conscience of PAA board members, to justify their decision to separate those that contributed to the holiday homes from their capital.

“The board’s choice to name the trust the Holiday Homes Legacy Trust is an acknowledgement that they know that a debt exists towards these contributors.”

He said half of the fund’s earnings should be allocated for each of the next 10 years to provide for those who paid into the original scheme. That ight mean a subsidy towards association subs, payment of conference fees or a reunion of PAA members, he said.

“I believe most holders of holiday home credits would accept this situation. I see this as a solution to the ethical dilemma caused when the holidmay home members were deprived of their capital.

“There are many who do not believe that these recommendations go far enough. But also, as responsible and professional financial advisers we wish to see a strong industry in the future, and are comfortable about trust funds being used for the advancement of financial advice, under the new Financial Advice NZ structure.

"But morally and ethically, it is quite wrong for the PAA to abuse their superior membership numbers and deny any benefit/legacy for those who are responsible for the strong financial position the PAA finds itself in today.”

Wilson pointed to other issues with the trust deed.

“There seems to be potential conflict in some of the clauses as to how the board members are to conduct themselves. It is likely that the board members will be active in the industry. The purpose of the trust, amongst other things under clause 4, is to promote and educate financial advisers. But 10.5.3; 10.11.5 and 12.3 spell out very clearly that no board member may benefit from any decision made by the board. How do board members who are active in the industry avoid this conflict?”

Chief executive Rod Severn said he was optimistic that he trust deed would be supported.

A lot of time and effort had been spent redrafting it, he said, and those who had complaints should be happy with the new version.

“They’ve been compensated for what they put in. It was never a commercial deal. It was a privately run member benefit and as such they paid a minimal amount of money to get access to good properties.”

The trust is one of the issues that has to be settled before the PAA can be wound up.

Tags: PAA PAA Holiday Homes

« Associations hang back from Financial Advice NZDisclose cost of advice, not commission: Financial Advice NZ »

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Comments from our readers

On 31 May 2018 at 3:33 pm Comprehensive Planner said:
It seems that Geoff Wilson has proposed the ideal outcome already, build a well funded professional body that has sufficient funding to promote the value of good advice, this would likely benefit the members as well as the general public.
On 31 May 2018 at 9:21 pm Murray Weatherston said:
I wonder whether the previous commenter in his undisguised advocacy that the Trust's funds be utilised to support Financial Advice New Zealand is aware of how much a red rag this will be to the passionate members of the former Holidays Home Scheme. .....probably not!
On 1 June 2018 at 7:41 am Geoff Wilson said:
Will there be a PAA Legacy Trust deed 3.0?
The new trust deed calls for a maximum of 5 trustees, and nominates Trevor Slater as the independent trustee and chairman. However, Rod Severn's covering letter advises that the new trust deed will have a minimum of 5 trustees, with the independent trustee as a professional trustee company.
Their woolly thinking is becoming a shambles.
On 3 June 2018 at 10:53 am Eyeinthesky said:
@Comprehensive Planner

There is a well funded body that has funding to promote the value of good advice, it's called the PAA. My understanding is that the IFA has virtually no money.

But Severn has just sent a message to PAA members telling them he is exiting stage left, assuming the members will be voting for the windup of the PAA. Funny how that whole thing gained its own momentum, yet members haven't voted on it yet. The members should be pulling their socks up and asking why Financial Advice New Zealand?

But the good folks running the hierarchy at the PAA have handed over large amounts of PAA money to FANZ, without asking members to do so. It's most likely that there has been a disproportionate amount of PAA money go into this compared to the IFA contributions.

Why should PAA members who contributed long and hard to the holiday homes, hand a couple of million dollars over to any other organisation?

Why should the PAA disappear. I think the members will be asking themselves that very question when they see the costs associated with the new organisation such as new P/I premiums and their benefits disappear.

Funny world we live in.
On 5 June 2018 at 1:14 pm Mr Slater said:
Eyeinthesky I am quite confused by your comments. Members quite clearly voted on more than one occasion for the establishment of Financial Advice New Zealand and for PAA Funds to be used to do so. Did you miss those meetings? Myself and the rest of the PAA Board would not have undertaken the actions we have without the approval and support of the PAA members.
On 6 June 2018 at 2:22 pm Arty said:
Readers may wonder why so many PAA members are trying to get the trust deed to include benefits for those who paid for the holiday homes in the first place. This is why. All PAA members paid additional subscriptions for some 35 years or more in order to buy seven holiday homes and also managed to fund all running costs over those years. Due to a very bad decision in later years, the scheme was sidelined and ring-fenced to a separate subscription and no attempt was made by the board in later years to attract new holiday home scheme members, so member numbers declined. Over the same period there was little attempt to minimise running costs by utilising enthusiastic volunteers as in the past, so guess what- PAA found themselves subsidising the scheme running costs. Rather than changing the structure and managing the running costs better, or allowing the scheme members to take over the running of the scheme and manage them on behalf of all PAA members, the board decided to push through a vote with a tiny majority backed by many board obtained advance proxies so that they could sell all the homes to get their hands on the capital for a trust for "supporting the adviser industry" They undertook that provision would be made within the trust deed to provide some benefits for past PAA members.
In closing the scheme they compensated members for the many hundreds of holiday home nights owned by members worth maybe $200 night with a derisory average of around $28 each night, and now are making no provision in the trust deed to in any way benefit the past scheme members who paid for the homes in the first place.
I suspect that for many past members of PAA the organisation's demise will be welcomed as we will no longer be reminded of this shameful aspect of a once great organisation's past.

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