Advisers should speak up for investor unfairness

An adviser says a recent $25 million new shares placement by Turners Automotive Group highlights the importance of advisers to investors as the industry continues to embrace roboadvice.

Wednesday, September 20th 2017, 6:00AM

by Susan Edmunds

The NZ Shareholders Association took issue with the placement last week, which diluted existing shareholdings and led to a stock-price fall.

NZ Shareholders Association chief executive Michael Midgley said it was unfair for the company to have used that method of capital raising, which he said should be only for emergencies, when a rights issue could have been completed in a month.

He said actions such as that shook the faith of investors in the sharemarket, and dented the confidence of new investors.

But he said a looming increase in roboadvice could leave more shareholders vulnerable, without a human adviser to turn to, to help them navigate these scenarios. Providers were already reporting an increase in interest in the stockmarket from young people priced out of the property market, he said. "The biggest problem is communication, getting the message out there."

Many were doing it alone, he said, so if they encountered these situations in future, there would be no one for them to consult for assistance.

He said advisers could offer a strong voice for shareholders.

"It would help the whole market if people would speak out about this more. New Zealand investment is good for New Zealand Inc and we need more of that."

Adviser Simon Hassan agreed it could be negative for small shareholders, especially those who bought through roboadvice or no-advice methods.

“Advisers can sometimes help investors avoid pitfalls like this,” he said. “Of course, it seems unlikely that someone who chooses to buy shares through a roboadvice platform would want to pay an adviser.”

Hassan said it was possible that roboadvice platforms with well-designed algorithms in an effectively regulated environment could also help investors avoid these situations.

He said investors could opt to pay an adviser to help them decide what to buy, and then use a low-cost robo platform to complete the transaction.

Tags: financial advisers investment NZSA roboadvice Turners