Bridgecorp promises a repeat performance for Kiwi advisers

It is understood as much as 70 per cent of the funds raised by the collapsed finance company Bridgecorp came through New Zealand financial advisers.

At the Institute of Financial Advisers (IFA) conference beginning today the New Zealand financial advisory industry will begin dealing with recriminations over the collapse of finance company Bridgecorp – a repeat of last year’s conference which opened just as news of a similar finance company collapse was breaking. If the 70 per cent figure is confirmed it would be a further blow to the reputation of the country’s advisory industry which is still smarting from the collapse of Provincial Finance last June. The failure of Provincial led to a round of finger-pointing as investors sought to blame financial advisers for the potential loss of more than NZ$300 million. While the group’s receiver, PricewaterhouseCoopers (PWC) which is also handling Bridgecorp, has since declared Provincial debenture investors should get most of their capital returned, the latest finance company debacle has reignited concerns about high adviser commissions paid by Bridgecorp. It is alleged Bridgecorp paid above market rates to advisers. David Hutton, IFA chief, was reported as saying he hoped the Bridgecorp case would encourage the industry to move toward a fee-for-service model. Meanwhile, Colin McCloy, PwC partner, said the receivers had not yet determined the extent of financial advisory involvement in the sale of Bridgecorp investments. McCloy said PwC is still “doing the numbers” on the Bridgecorp accounts with a further update expected towards the end of this week. Both New Zealand’s financial advisory industry and the non-bank finance sector are about to undergo regulatory change with a new law expected to be in place before the end of this year. Under the new proposals all financial advisers will have to be registered. As well finance companies will come under the control of the Reserve Bank and will be required to be rated by an international ratings agency.