News Round Up

Tax changes fundamentally flawed, Managed funds surge in popularity, Economists divided on rate cuts, Fund borrows to invest, UK pension transfer scheme approved. Comment: My view on the future shape of the advisory industry

Monday, April 24th 2006, 6:27AM

The Financial Planners and Insurance Advisers Association (FPIA) says that the proposed changes to the taxation of direct investments in offshore equities is fundamentally flawed.

It says the unrealised capital gains tax disadvantages direct equity investment outside of Australasia will discourage prudent international diversification. While ASX-listed shares will be treated in the same manner New Zealand investments, other Australian assets, such as managed funds, will be subject to capital gains tax.

The association also says the 33% tax cap on managed funds appears to be an "illusory" benefit for people on higher tax rates as increased compliance cost associated with direct investment will likely be offset by fees payable within the managed fund.

It claims "the additional costs of compliance are significant and likely to have been underestimated. Some of theses new costs will be passed on, down the chain, to investors and advisers."

Managed funds surge in popularity
Managed funds have recorded an upsurge in popularity in the latest ASB Investor Confidence survey.

Residential property remains the asset class which is expected to give the best return, and managed funds was the second highest ranked type of investment.

While residential rental property remains the highest ranked asset class, it dropped four points to 20%. The big change in the first quarter of 2006 was managed funds, up seven points to 16%.

ASB Investments head of investment Jonathan Beale says the increase in confidence is driven by improving returns. Also announcements regarding taxes and regulation and changing market dynamics have seen investors placing increased confidence in managed funds.

Economists divided on when to expect rate cuts
Economists are not expected the Reserve Bank to cut the official cash rate this week, and they have a range of views about when the bank will start to ease monetary policy. [MORE]

Comment: My view on the future shape of the advisory industry
Quite often I am asked for my view on the future of the financial advisory industry in New Zealand. My view, which I am happy to explain to anyone who asks (and it reiterates what I have put on record before), is that the future will be quite different to Australia.

New Zealand will not adopt a model where all advisory businesses have to be part of a network or dealer group. [READ ON]

Fisher to gear fund
Fisher Funds Management is planning to gear its New Zealand share fund so that it has enough money to take part in two upcoming sharemarket floats.

The fund is currently fully invested and its manager, Carmel Fisher, does not want to liquidate any of its current holdings to take part in the two, undisclosed, IPOs. Under its trust deed the fund can borrow up to 25% of its assets - currently is has a net asset value of close to $110 million.

UK pension transfer scheme approved

Britannia Financial Services has received regulatory approval for its United Kingdom pension scheme. It is the first firm in New Zealand and the fifth in the world to receive approved status under new regulations that came into effect this month.

Britannia is wanting to become the specialist facilator of UK pension transfers for advisers and their clients in New Zealand. However it is not the only advisory firm operating in this market in New Zealand.

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