Councils seeking independent financial advice
Simon Ibbetson
The investment choices for NSW local councils may have been drastically curtailed since the NSW Government embraced the recommendations of the Cole Inquiry earlier this year, but council demand for financial advice remains strong.
The two largest advice businesses servicing this market, Grove Research and Advisory and Oakvale Capital, have reported an increase in enquiries for investment advice from NSW councils since the inquiry.
Enquiries are emanating from councils that previously did not receive financial advice and councils that had advice providers which have now been excluded by the Cole Inquiry recommendations.
The Cole Inquiry was set up in the wake of paper losses of up to $400 million by some NSW councils from investments in collateralised debt obligations (CDOs) in the wake of the global credit crisis.
Effectively, the inquiry’s recommendations limit councils to investing in banks, building societies and government and semi-government authorities and ban them from taking advice from dealer groups that sell, manufacture or deal in investment products.
Oakvale Capital chief operating officer Paul Travers said enquiries had “definitely picked up throughout the crisis and since the inquiry” from councils seeking advice on managing their existing investments and on future investments.
“It would be a rare month in the past year that we have not had a new council call us up asking us to provide it with investment advice.”
While the Cole Inquiry recommendations have “limited the scope of council investments, there’s still a wide investment choice open to them”, according to Travers.
“Yes, we are excluded from putting council clients into asset backed securities or mortgage backed securities or the like at this point in time.
“On the other hand, they can invest in financial institutions such as banks and building societies, and there’s a wide range of these available in Australia.”
Grove Research and Advisory managing director Simon Ibbetson said the boutique was currently in discussion with four local councils with a view to adding these to its permanent client portfolio.
It is also “winning an increasing number of specific projects from councils involving detailed analysis of CDOs that have blown up”.
“A number of councils have asked us to review their CDO portfolios to see whether they should sell out of these products as investments and crystallise their losses or stay invested in the hope the sector recovers.”
He said the Cole Inquiry recommendations did not prevent advisers from continuing to review and monitor the existing investments of councils.
AUTHOR
Mike Taylor
Recommended for you
Professional services group AZ NGA has made its first acquisition since announcing a $240 million strategic partnership with US manager Oaktree Capital Management in September.
As Insignia Financial looks to bolster its two financial advice businesses, Shadforth and Bridges, CEO Scott Hartley describes to Money Management how the firm will achieve these strategic growth plans.
Centrepoint Alliance says it is “just getting started” as it looks to drive growth via expanding all three streams of advisers within the business.
AFCA’s latest statistics have shed light on which of the major licensees recorded the most consumer complaints in the last financial year.
