Advisers and shoemakers

Monday, April 16th 2007, 9:49AM

One of the things which has been fascinating to watch over the past couple of years is the effort fund managers and the like have put into trying to buy up distribution.

What's even more fascinating is that very few deals have been done.

And to add another layer to this puzzle is that firms from across the Ditch have come over and seem to be getting a few runs on the
board. While MFS is one, WHK has been buying accounting firms, Plan B has acquired a couple and ASX-listed Transzact is in the game too.

My question is why have the established "manufacturers" in New Zealand had such poor results?

To partly answer this question I will use a conversation I had recently with one of our fund managers the other day.

His answered the question by using the example of the Italian shoe industry. Essentially what happened there is that the country had heaps of small shoe makers. There was talk of rationalisation (terrible word) yet nothing happened…until. The Chinese started making and exporting shoes.

This was the trigger for change.

The point of the story is that there had to be some major structural event to push the New Zealand advisory industry to change. His view was that in New Zealand financial advisers were doing ok, they had good little businesses and were making good incomes. Why then would they want to change this? What is the trigger event?

Looking ahead it is easy to say that pending regulation is the trigger point, however we both felt the changes, while still some way away, weren't necessarily big enough to force rationalisation or greater "corporatisation" of the advisory industry.
An added twist is that I have spoken to some people who recently took part in ownership changes and many (if not all) said they had plenty of offers, yet hadn't necessarily gone with the one giving the most cash.

A number have mentioned Macquarie as being very active in this space and offering big money for firms, yet no deal has yet been done.
This whole area of change is something Good Returns and ASSET are focussed on. In the latest issue of ASSET we have the first survey of the big financial planning groups. The survey is a start and we plan to expand it further over coming months.

One of the things which pleasantly surprised us was the willingness of all the banks (bar BNZ) to take part, along with some of the larger organisations like Money Managers, Spicers, Northplan and Goldridge.

However a number of others were less than willing to participate including Macquarie, The Portfolio Group and Plan B/Strategic Asset Management.

Excuses such as "wanting to stay below the radar" are a little lame, especially when the industry talks about openness and transparency.

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