The owner of about one-third of van Eyk, Kiwi financial services entrepreneur George Kerr, related to this magazine in July his belief that the new landscape for financial planners meant they would be looking for a closer alignment with groups such as his. “It’s almost as if we’re going back to the old tied-agents system,” van Eyk chief executive Mark Thomas says of the impact of the move to fee-forservice advice. Kerr sees the potential for ratings agency involvement to go even further: “The key is to provide quality research and solutions, but we also want to be able to ensure that, where there’s a change of ownership at a practice for instance, that we can take stakes in them. We want to play a larger role in the industry.” The head of retail services at Mercer Investment Consulting, Rashmi Mehrotra, says raters’ advice to dealer groups is becoming more customised.

“You can’t just prepare one list, we need to get to know the different risk appetites of the dealer groups. We encourage them to have a view of where investment markets are going, because at the end of the day you are a financial adviser,” she says. “We take those views and put together different strategic asset allocations for different dealer groups. One might include hedge funds, another might include gold.” Mehrotra claims that Mercer, which does not accept payment from managers for ratings, was alone in refusing to rate any agribusiness schemes. “I didn’t want to rate them, and I was free to write a report explaining why. And I was right, because they all collapsed,’ she says. Meanwhile, predictions of tough times from the likes of AIOFP’s Peter Johnston have Mark Thomas talking tough about van Eyk’s integrity in comparison to other ratings agencies. “The argument from research houses using the ‘pay-for-ratings’ model that they only look at the ‘best of breed’ funds does not stand up to scrutiny,” Thomas says. “The fact remains that under the pay-for-ratings model, research houses can only rate managers who are willing to pay, but under the subscriber-pays model, those fund managers typically opt out themselves rather than face an independent research process that could rate them poorly.”

Thomas has claimed that in aggregate, van Eyk judges only 52 per cent of the funds it rates as ‘investment grade’, versus 87 per cent, 89 per cent, 93 per cent and 95 per cent by S&P, Lonsec, Morningstar and Zenith, respectively. However David Wright says those numbers are based on an incorrect table in an Australian Financial Review article, and says the actual numbers are as per the table which appears here. Wright says Zenith does not provide a rating to 65 per cent of the funds which are presented to it. Not that the numbers of funds rated matter so much anymore. Wright believes that “the planners that worked off a massive approved product list were not the type to be using us. Our clients tend to be interested in deeper, quality research on fewer funds, and we think these planners will be the ones to survive. “ Wright adds that across the industry, the growing number of managers withdrawing ratings (and ceasing to pay the annual monitoring fee that goes with it) is a “barometer” of a managed fund industry that has become more selective in its approach to gaining ratings.