New Zealanders being taken for a ride

New Zealanders appear more ready than ever to lose their money to absurd investment products lured by the promise of high returns according to John Farrell, head of the Securities Commis-sion.

New Zealanders appear more ready than ever to lose their money to absurd investment products lured by the promise of high returns according to John Farrell, head of the Securities Commis-sion.

Farrell says that over the last year the Securities Commission has noted a marked increase in the number of complaints from New Zealanders who had invested in such scams.

“While we don’t have a precise figure on the amount lost to investment scams the number is definitely getting higher, based both on the amount and range of complaints we’ve had,” Farrell says.

“There are more schemes about and the incentives for people to find customers for such products are better for those prepared to run the gauntlet.”

Investors are usually attracted to the products by advertised returns often exceeding 10 per cent per month, an outcome Farrell says is most unlikely.

Most fraudulent products are overseas based leaving little recourse for those investors who lose their money, he says.

“The majority of products we’re looking at now are offshore but they have people on the ground in New Zealand,” Farrell says.

The Securities Commission polices New Zealand domiciled investment products which have to meet stringent legal conditions but have no control over most overseas based investments.

He says the vast majority of people the Securities Commission have investigated who sell these investments don’t “necessarily having too much experience in what they’re doing”.

However, Farrell says the increase in fraudulent schemes does lend some weight to the argument for official recognition of accredited investment advisers.

“There is something to be said for helping the public recognise who are the people in the invest-ment industry with status and dedicated to long term investment against the fly-by-nighters,” Farrell says.

He says this does not mean he is supporting compulsory registration of investment advisers and financial planners.

“There are costs as well as benefits with such a scheme,” Farrell says.

The Securities Commission has also released a study of investor behaviour that examines the way investment decisions are made based on expected returns, risk preference, and personal con-fidence.

Farrell admits there will always be some investors ready to be ripped off but says the more in-formation available the better.

“With a sustained effort from organisations such as ourselves there will be a better quality of in-vestment in New Zealand,” Farrell says.

“There will be more money in the economy, more money available for development finance and more people saving adequately for their retirement if we all try a bit harder to get this message across.”

Unitholders in the poorly performing New Zealand Rural Property Trust have backed a man-agement proposal to convert to a closed end trust at a special meeting.

More than 80 per cent of unitholders voted to change to the new closed end structure allowing shares to be traded on the secondary market and putting an end to all current and future redemp-tion rights.

Trust chairman, Sir Selwyn Cushing, says the open structure did not suit the trust’s asset base and hindered further growth.

“A trust based on a large and relatively illiquid asset like farmland and forestry should never have been established as an open trust,” Cushing says.

A PriceWaterhouseCoopers report supported the move citing the open structure as unworkable and potentially unfair.

The trust has been under pressure from some unitholders, angry at its poor performance, to wind up. Under the new arrangement, the 4700 unitholders will receive a capital repayment of 12.5 cents a unit in the last quarter of this year and income distributions from September 2000 esti-mated to average close to 7.5 cents per unit.

However, some unitholders at the meeting continued to press for a wind up, labelling the trust as an “appalling investment”.

The Super 2000 Taskforce is enlisting school students in the search for a stable retirement in-come policy.

In a competition sponsored by Armstrong Jones, secondary school students are being asked to present a formal proposal to the Taskforce taking into account demographic, economic and community factors.

Students have until July 2000 to finish their reports with the winning students and schools in various categories sharing a prize pool of $42,000.

Teenagers are not traditionally associated with the issue of long-term retirement savings but head of Armstrong Jones, Paul Fyfe, believes it is an ideal subject for them to tackle.

“In searching for the long-term solution it is vital all New Zealanders’ views are considered. This competition gives our younger generation just such an opportunity.”