[Weekly wrap] Managed funds the victor - just

This week featured the IFA annual conference, one of the biggest events of the year for the financial advice industry, but that wasn't all that was going on in the New Zealand financial services sector.

Friday, July 20th 2012, 8:57AM

by Niko Kloeten

The conference provided plenty of food for thought for advisers on a range of issues they face going about their daily business, with one of the most well-received sessions being the debate between direct investment and managed funds.

This had advisers on the edge of their seats as Mark Lister of Craigs Investment Partners representing direct investments and Brian Gaynor of Milford Asset Management in the funds corner made their arguments for their preferred investment option. A show of hands had Gaynor winning narrowly.

But regardless of what mix of direct/managed funds they choose, advisers shouldn't market themselves based on their investing prowess, one speaker told attendees. According to Paul Resnik, advisers can add as much as 6% per year in non-investment benefits for their clients.

The story contains a breakdown of how he came up with that number, but his message was clear: promote this "alpha" rather than relying on chasing investment alpha, which is more difficult to achieve. His claim is sure to be met with some scepticism but advisers obviously need to add some sort of value or clients won't come back.

Business commentator Rod Oram also spoke at the conference, looking at the wider business environment and what it will mean for advisers looking ahead over the next few years. His message was that volatility is no longer temporary but permanent.

Oram can be a bit gloomy at times in the economic outlook he presents (and who can blame him given recent events), but his message at the conference was a positive one for advisers: the volatility will create challenges but it will also create opportunities. This theme was echoed by other speakers at the event: difficult economic conditions provide an opportunity for advisers to add value.

As mentioned earlier, there was plenty going on outside the conference. For instance, the end of AMP's World Index Fund drew closer with the NZX agreeing to delist its units from the exchange.

The fund is already closed to new investment and will be shut down in September. Its demise largely reflects changes in taxation of managed funds, in particular the Portfolio Investment Entity (PIE) regime introduced in 2007. While this new system has been a boon for the fund management industry overall, there were always going to be a few casualties.

The other big news in the managed funds industry this week was Mercer's appointment of former OnePath chief investment officer Philip Houghton-Brown. This is a big move for Mercer as it allows its New Zealand boss Martin Lewington to focus more on growing the company's business in New Zealand.

Despite managing a combined $26 billion in Australia and New Zealand, Mercer operates under the radar somewhat, particularly compared to the big banks and insurer/fund managers like AMP.

This week also saw more finance company convictions, with two former directors and the former chief executive of Capital + Merchant Finance being found guilty of fraud charges by the SFO. They have been remanded in custody for sentencing, which means jail time is a near certainty.

In insurance news, Asteron has outlined its product changes. Meanwhile, low-frills life insurer Pinnacle Life has received a credit rating from AM Best.

And finally, in mortgage news, a new survey has found more people are shopping around for home loans.

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

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