Another one bites the dust.........

The collapse of Ross Asset Management in Wellington appears to represent another sad chapter in the long list of investment organisations, products, and downright scams to hit the New Zealand public.

Those of you of an appropriate vintage will recognise the album cover from Queen - it appears to me that the title track has some striking similarities to the experience of investors in NZ. Obviously, investors losing money due to dishonesty or incompetence should be a major industry issue, and while the majority of financial advisers are neither thieves nor fools, the actions of the few tarnish the reputations of the many.

However, a major concern is the fact that the latest disaster took place against the backcloth of a relatively new regulatory environment - with very adequate resources - which appears to be powerless to prevent such investor damage, and unable to minimise the opportunities for such initiatives to be perpetrated.

It appears that the compliance and regulatory regime has pulled up short in preventing another truckload of investors' money disappearing down the gurgler.

I suspect that there are a number of AFA's out there asking themselves why they bothered.

Now, I appreciate that the regulators are not in business to prevent investment losses, or to prop up commercial failures - but surely the point of a financial regulatory regime is to minimise consumer exposure to those who would mislead, steal, or otherwise put the financial well-being of clients at undue risk.

Regulation, of course, is not a science - there are no 'right' answers, but there must be questions raised over this latest debacle - so here's one for the 'consultants' to get stuck into -

Are there other Discretionary Portfolio Management Services out there which are likewise operating in the shady space occupied by Ross Asset Management?

While the British regime was acknowledged as unwieldy and complicated at inception in 1988, the 'levels of advice'  structure seemed to make sense at the time. Put simply, the more complex and discretionary the advice offered, the more financial hurdles had to be negotiated before authorisation was granted. Level 6 advisers who had their clients authority to move investment funds around, had to provide audited proof of specific solvency margins and liquidity ratios which would provide a measure of investor protection against the adviser firm going pear-shaped.

And isn't confidence in our capital and investment markets facilitated by investor protection?

This post doesn't claim that the British system was perfect - far from it. But it seemed to offer a more robust oversight of the precise areas where investors were most at risk  that is not, repeat not, where the life and general insurance advisers operate - but in the investment adviser area.

So why does the regulatory regime insist on addressing the lowest common denominator by doggedly pursuing a one-size-fits-all approach?

Slàinte mhòr agad

The Laird of Albany