New Zealand could follow Australia’s lead and dispense with the trus-tee system for many investment products according to James Turnbull, manager of Macquarie New Zealand.
New Zealand could follow Australia’s lead and dispense with the trus-tee system for many investment products according to James Turnbull, manager of Macquarie New Zealand.
Turnbull says if Australia’s Managed Investment Act (MIA), which ditches trustees for most managed investment funds and replaces them with a single responsible entity (SRE), works well, it might encour-age a similar move in New Zealand.
“It’s very difficult to predict but it is logical it will happen here. A lot of companies will look at the Australian changes and if they appear successful then many will support its introduction here,” Turnbull says.
He says awareness of the new system will increase as many New Zea-landers have Australian domiciled investments and will be informed of the changes.
Macquarie has sent a letter to financial advisers in New Zealand de-tailing the changes flowing from the MIA to the trust deed of its Gilt Edge Access cash management account.
“The only change people will notice is that they no longer make out their cheques to National Mutual Trustees (the former trustees) but directly to Macquarie,” Turnbull says.
He says the letter hasn’t provoked any negative response as most fi-nancial advisers are already aware of the changes.
“We’ve had one or two calls from advisers wanting to clarify the situation but for many it is a non-event. Most have said its fine and see nothing too controversial in the changes,” says Turnbull.
He says while the situation is different in New Zealand, the SRE con-cept could work well here and would be greeted as a positive step by many in the industry.
“You have to take a close look at the trustee companies and ask if they add value. And if they do, how much value. If an SRE can be shown to be just as responsible why not introduce it?” Turnbull says.
However, business development manager for the Public Trust corporate trustee services, Brian Young, says the SRE concept would not be suitable in New Zealand and questions its success in Australia.
The Public Trust, Tower and Guardian Trust are the three major sup-pliers of corporate trustee services in New Zealand.
“Obviously we’re not supporters but I think that over time the pur-ported benefits of the SRE in Australia won’t materialise,” Young says.
“There are already some questions on how much savings the new system will produce. You have to ask ‘is the investor better off?’ and I take the view that an independent trustee will be more objective.”
Young says Australian financial managers are a significant presence in New Zealand and some are arguing that the anomaly between the two systems doesn’t make sense.
“As I understand it, the same situation that caused the development of the MIA in Australia doesn’t exist here,” Young says.
He says the major legal conflicts between fund trustees and managers in Australia, which were significant factors in the creation of the MIA, haven’t happened in New Zealand.
Head of the Investment Savings and Insurance Association (ISI), Vance Arkinstall, says the differing regulatory environment may make the SRE system unworkable in New Zealand.
“There are some onerous regulatory requirements in Australia that make dropping the trustee possible. But in the light-handed regula-tory environment that exists in New Zealand, maybe there is a greater need for independent trustees,” Arkinstall says.
However, he says with many Australian based investment products available in New Zealand, there may be some “downstream” effects here flowing from the MIA.
The Investment Savings and Insurance Association (ISI) and the Health Funds Association (HFA) will be working closer together in the fu-ture.
From July 1 the HFA, which represents New Zealand’s health insurers, will be sharing the same Wellington office space as the ISI headquar-ters.
Head of the HFA, Andrea Pettett, says the move is a practical one but will also enable the HFA and the ISI to cooperate on achieving common goals.
“The HFA needed space for administrative and secretarial reasons but on a strategic front we share synergies with the ISI,” Pettett says.
“We face similar issues but with a different focus. The ISI looks at retirement funding issues and providing for health care is interwoven with that.”
Pettett says some of the HFA’s 15 members also belong to the ISI, strengthening the bond between the two organisations.
Private health cover has been declining in New Zealand in recent years and Pettett says this is due both to a lack of understanding by the public and the failure of the government to define the sort of health services it will provide.
“The government needs to clarify the sort of health services it will and won’t provide. This will empower the public to get health insur-ance it needs at an earlier age,” Pettett says.
She says new medical technology and the increased use of existing technology means people are both living longer and getting operations at an older age. Combined with the already aging population, Pettett says the costs of health care will spiral upwards.
“Our strategic relationship with the ISI should help us communicate these issues better,” Pettett says.
The risk of inflation in the New Zealand economy appears to have de-clined, according to head of prf(consulting, Richard Flinn.
Flinn says the latest prf(consulting Savings Indicator (formerly the Equitilink Savings Indicator), showed the increase in household mortgage borrowing remained steady at 2.8 per cent for the March quarter.
“The economy can readily digest mortgage borrowing growth of under 3 per cent, which we have had for the last two quarters,” Flinn says.
“The Australian economy has demonstrated that it can turn in strong rates of growth without inflation taking off. In the past, New Zea-land has never managed to do this. Economic growth has quickly trans-lated into excess demand for housing, which has in turn, turbo-charged inflation. This time, however, it might just be different.”
Flinn also says it appears that the recent increased flow of money into managed funds is the result of households shifting money from low interest bearing bank accounts with no overall gain in savings levels.
“However, managed funds usually invest in higher growth sectors, both in New Zealand and overseas,” says Flinn.
“Over the longer term, if households continue to invest more and more assets in the managed funds sector, it will do far more good to the national savings level than holding the money in a bank account.”
New Zealand’s High Court has given final approval to Tower Corpora-tion’s demutualisation scheme after months of legal wrangling.
Tower chief, James Boonzaier, says Tower should now list on both the New Zea-land and Australian stock markets by early October.
