Camelot tries for credibility in troubled sector

By ROB STOCK - Sunday Star Times | Sunday, 10 August 2008

With the reputation of financial advisers at an all-time low, a new national advice chain launches this week hoping to convince investors that it embodies the codes of duty and honour of King Arthur's Knights of the Round Table.

Camelot combines 11 financial planning firms dotted around the country with more than 50 advisers and $1 billion of funds under management, putting it in the top five of national financial advice chains, excluding the banks.

Its main equity partner is Wellington-based Grosvenor Financial Services, a low-profile funds management company with more than $700m of New Zealand investors' funds under management.

It won't be easy to win the public's trust, following scandal after scandal fuelled in part by commission-chasing, but Grosvenor chief executive Allan Yeo said the advisers in the Camelot chain draw 95% of their investment income from fees.

That meant they were not under pressure to seek out the biggest commissions, a factor in advisers sinking cash into the worst of the failed finance companies.

"Potential clients have become increasingly cautious, even suspicious and they lack confidence when it comes to seeking financial advice," Yeo said. "In today's investment climate, the good guys need to stand up and be seen."

The prices being paid for investment advisory firms reflect public concern about the value of financial advice. While insurance advisory businesses fetch around 3.5-5 times their trail commission income, financial planners are worth just 1.5-3 times.

Yeo said the aim was to grow the chain into the largest financial planning firm in the country.

New Zealand is not replete with untarnished big-brand, national financial advice chains.

Other than the sharebroking firms, two biggies that have steered clear of the recent finance company collapses are AXA-owned Spicers and independent New Zealand Financial Planning, which both use the same fund manager to provide them with investments.

Firms with a more chequered history include Money Managers, whose reputation has been sullied by repeated investment fund failures.

Financial adviser Vestar lost all credibility after investing clients in a shocking list of finance companies that collapsed. It has sold its clients to Gould Wealth Management, which has about $400m of funds under management and 11 offices around the country.