[Weekly Wrap] Cracks appear

This week tensions started to show between AXA-affiliated advisers and AMP over new contracts it wants the advisers to sign. The AAA (formerly AXA Advisers Association) says AMP and other providers are trying to contract away their liabilities under the Financial Advisers Act.

Friday, December 16th 2011, 10:30AM

by Niko Kloeten

No big merger has ever been completed without teething problems and AMP's takeover of AXA is no exception. We will keep you updated on developments in this saga.

Another big story this week was the potential impact of new rules around QROPS (Qualifying Recognised Overseas Pension Schemes), which are used by expat Britons to transfer their pension funds to their new country.

New Zealand has been singled out in the draft legislation with a provision aimed at curbing the habit of allowing people to simply pull all their money out as a lump sum once it gets here (bit embarrassing really). QROPS providers have only months to prepare but KiwiSaver schemes are exempt.

Last week the SFO laid criminal charges against five people associated with South Canterbury Finance. This week the FMA said it would take civil proceedings against the directors of Hanover.

But while the two agencies have worked together on a number of finance company prosecutions, FMA chief executive Sean Hughes says they will likely go their separate ways once these cases are concluded.

Between all its responsibilities the FMA will have plenty to do, while there are sure to be some Ponzi schemers the SFO can bust to keep it busy once the huge backlog of finance company cases has gone through the courts.

Speaking of fraud, one thing that can be said about fraudsters is they know how to ask people to give them their money. New advisers entering the industry may not be very good at this aspect of their jobs, according to financial services veteran Mike Moore.

His complaint that young advisers are well-qualified and smart but lack personality is not unique to this industry. A number of other professions have had the entry requirements raised by regulation, producing people who have the right pieces of paper but struggle once they get into the field.

One person who won't be working in the consumer finance industry again is jailed former National Finance 2000 director Allan Ludlow, who was the first to receive a ban of its kind.

Meanwhile, the Auckland Council has embarked on a US$2.5 billion Euro bond programme using a new law that allows councils to borrow outside New Zealand. With municipal bonds showing signs of stress in the USA, let's hope New Zealand's councils don't end up in similar strife.

BNZ and Westpac grew their loan books in the September quarter, in contrast to ANZ, ASB, HSBC and SBS, which all saw their mortgage books shrink. Mortgage lending grew $762 million to $167.05 billion in the quarter. However, this is much slower than the growth seen up until 2008.

And finally, it seems finance companies are doing pretty well (those that are still left, that is). Profit across the sector has increased as the asset base shrank, while building societies and credit unions are being squeezed by lower interest margins.

Niko Kloeten can be contacted at niko@goodreturns.co.nz

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