[Weekly wrap] Hotchin breaks his silence

Former Hanover managing director Mark Hotchin has put the heat on the FMA this week; also, the IFA has laid out its future while a stand-off between AMP and former AXA advisers neared a conclusion.

Friday, August 3rd 2012, 9:22AM

by Niko Kloeten

Hotchin's public statement, which followed the former Hanover directors filing their statements of defence against the FMA proceedings, features some strong words about the regulator and the merits of its case. This ups the ante in what is already an important case for the FMA, which would be left with egg on its face if its court action failed.

Unlike many of the other finance companies, there have been no criminal charges laid against the Hanover directors. Some commentators have even pointed the finger at Allied Farmers for its management of the assets after it purchased them in 2009. Whatever the outcome inside the court, Hotchin is unlikely to see his popularity amongst the general public improve. But he will feel a strong sense of vindication if he wins the case.

Meanwhile, the Institute of Financial Advisers has laid out its future plans. Whenever industries become regulated, the challenge for professional bodies is to remain relevant in an environment where everyone has to meet a certain standard. When investment advisers are required to be authorised, what can the IFA do to convince these advisers of the benefits of membership?

Another challenge is around the use of designations such as CFP and CLU, which the IFA has the rights to in New Zealand. These are international designations but do they have any relevance to New Zealand consumers? And how can the IFA promote them as being a step above what advisers need to do to enter the industry? These are issues the IFA will no doubt have to deal with, but the success this year's conference, which saw increased numbers, is a positive sign for the organisation.

The AAA (formerly the AXA Advisers Association) is another group that has gone through plenty of change recently, including a name change following AMP's purchase of Axa a couple of years ago. One of its challenges has been around helping its advisers deal with a different way of doing things at AMP compared to what they were used to at Axa.

Not suprisingly there have been some teething problems, including a dispute over contracts offered by AMP to the AAA's members. However, an end appears to be in sight. An announcement is likely to be made shortly and we will keep you posted.

Who's the biggest competitor to your business? According to Morningstar's Chris Douglas, in recent years it's probably been term deposits. The good news, he says, is that deposit rates are likely to stay low for a while, meaning financial advisers should have an easier time offering their services to people who can't just get 7-8% returns by sticking their money in the bank.

Getting 4% per year isn't so attractive, and could drive people to seek financial advice as to how to up that return. The challenge will be, in a volatile market, having an investment strategy that can actually beat that. Douglas didn't say the job would be easy...

Is the financial advice industry about to see an exodus to Australia? It's unlikely, but the recently announced trans-Tasman recognition agreement has made things easier for those already contemplating the move. What will be really interesting will be whether Aussie financial advisers decide to make the switch over here.

The government's anti-money laundering legislation hasn't convinced one adviser, who says criminals will probably find a way around it and financial advice is a low-risk industry anyway. Advisers seem to consider the new law a bit of a nuisance but at least they have had plenty of practice filling out forms over the past few years.

And in a slightly alarming report this week, Tyndall asks if we are seeing the beginning of a new global recession?

In deposit rates news this week,Doug Somers-Edgar's Orange Finance has finally been put into receivership, three years after debentureholders voted against the option in favour of a moratorium. This is one of several finance companies that saw investors choose a moratorium (Hanover being the biggest example) over winding the company down. Perhaps they expected the market to pick up, but things haven't improved.

And to conclude this weeks' wrap we have updates in People about appointments and resignations at Accuro; Fisher and Paykel Finance and Medical Assurance. Details here.

If you want to be an underwriter then check out this position.

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

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