[Weekly wrap] Bad news for QROPS providers

This week saw tough new regulations for QROPS confirmed; meanwhile, an insurer defended its online offer and the SFO announced an investigation into another financial services company.

Friday, March 23rd 2012, 9:32AM

by Niko Kloeten

The changes to the QROPS scheme have been on the cards for a while, but despite lobbying by New Zealand's financial industry, the changes are set to go through almost unchanged.

This will cause disruption for QROPS providers, who may have to shut down their schemes and relaunch new ones. And, according to QROPS adviser David Milner, will slow down the flow of UK pension transfers while those at the other end try to work out who is compliant and who isn't.

The reforms hit the whole industry (with the exception of KiwiSaver, which is exempt) rather than targeting the specific providers whose conduct led to New Zealand being singled out in the reforms. Those who behaved themselves may well feel hard done by.

Another issue that can cause temperatures to rise is that of online insurance. Online life insurance has proved controversial among advisers, and now New Zealand's first online income protection insurance has met with a similar reception.

The debate is unlikely to go away as the popularity of online shopping will make more insurers at least offer their products online. And as Cigna chief executive Gail Costa pointed out, New Zealand has an under-insurance problem, despite the best efforts of advisers.

The SFO may be winding down its investigations into failed finance companies but it is still springing the odd surprise, such as this week when it announced it is investigating NZF Group for alleged related party transactions.

The company seemed mystified by the announcement, which came only days after the receivers of NZF Group subsidiary NZF Money announced investors would get between 25c and 42c in the dollar of the $16.4 million they were owed when it went into receivership last July.

There was also bad news this week for investors in Capital + Merchant Finance - while Fortress Credit Corp will be repaid in full, debenture holders will get nothing. Their only hope for recovering any of their money is litigation, the receivers said.

To paraphrase Hamlet, "To fix or not to fix, that is the question for mortgage holders." Debate has intensified in recent weeks as speculation mounts about how soon New Zealand's interest rates will rise, and whether this will be driven by the Reserve Bank or by overseas market forces.

Westpac chief economist Dominick Stephens has analysed the situation and concluded there are three sides to the argument.

The big Australian-owned banks that dominate the mortgage market should be handing out bouquets to the Aussie government, which has boosted the ratings for their parent companies by two notches due to its "highly supportive" attitude.

However, the New Zealand government's supportiveness may be questioned as a result of the Open Bank Resolution (OBR) policy, which is designed to avoid the need for bank bailouts.

Speaking of Australian companies in New Zealand, fund researcher Lonsec says it is making steady progress on this side of the Tasman, after crossing the ditch in 2010. The similarities between the markets make New Zealand a natural fit, according to Lonsec, which has been touring the North Island talking to advisers.

Also this week, Professional Advisers Association (PAA) members voted unanimously in favour of measures to fast-track the New Zealand Mortgage Brokers Association (NZMBA) joining it.

Consolidation has been taking place in the financial planning market as well, with Money Concepts Wellington joining the Camelot NZ Limited Partnership.

And finally, Fisher Funds has rejected reports it paid $50 per member of the New Zealand Association of Credit Unions KiwiSaver scheme.

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

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