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Are mergers of financial planning businesses worth it?

News that Northplan has acquired a 50% stake in Strang Financial Planning prompts the question - what is the strategy? Where, indeed, will value be created in this game? National scope is a prize - if your ultimate exit strategy is a trade sale to a large bank or fund manager.

Financial Planning (at the advice end, not the funds management end) is not, as yet, a scale business. I said - yet. If a planning firm can demonstrate diminshing cost with scale through the application of systems, training, or brand, then it could become so. Regulation will actually help, by emphasising the importance of these features of the business over a the more individual relationship-based ones.

So maybe Northplan are getting in ahead of the rush.


Long Term Care

You buy car insurance in case you're in a wreck. You get homeowner's insurance in case there's a fire. Doesn't it make sense to get long-term care insurance in case your health goes downhill?

It might. But the issue is complicated. States require car insurance, and the mortgage lender requires a homeowner's policy. But no one forces you to have long-term care insurance, and most people don't.

And if you are considering one of these policies, there are lots of coverage options to be weighed.

I found that as a 55-year-old I'd have to spend $218 a month for a policy that would start out with $219,000 in coverage, adequate for several years of care.

I could get a policy for less than $50 a month, but the more expensive one carried automatic inflation protection, raising the amount of coverage 5 percent a year.

Read more at InsuranceWeb


NZ Property Magazine

Remember Andrea Milner? Andrea used to work with me a few years back, and was within the Chatswood fold for about a year. She left to return to the legal profession - but quickly remembered why she had left in the first place and then joined Lexis-Nexis as editor of New Zealand Lawyer magazine. Now Andrea has left NZ Lawyer to join NZ Property Magazine as editor.

Andrea was always too creative for the legal profession (where of course, creativity can flourish, its just not all that common). In fact, it was in large part due to Andrea that I commenced to Blog (Alan over at Half-pie might be called my 'blogfather' and Andrea... well... could hardly be called my blog 'mother' but some of the things she did got me involved in blogging, but I digress...

Most of us know that journalists, unlike investors, tend to be generally short of a bob or two. Heck, writing is usually badly paid. I write this for free, you only pay me when I do consulting work for you. So that makes it tricky to get good financial journalists - because they rarely have much personal experience of investing. Their stronger suites are usually cycnicism, inquisitiveness, and alcoholism.

Andrea, on the other hand, actually owns some rental properties - which is a big step ahead of many others in the field. She is also backed up by a publisher, Philip Macalister, who is a successful entrepreneur, with a good stable of publications. NZ Property is already an established and successful magazine - but with challenges ahead for the property market I reckon its going to need all the management talent it has now got.


Welfare Reform

Events will always be seized upon by politicians of whatever stripe to support that own pet ideas. The tragedy of the Kahui twins being a big event, will generate a greater response. Well, for those wondering how to even raise the idea that maybe welfare and state intervention were at least part of the problem, rather than part of the solution - take heart: here is news about welfare reform which has worked.


AIA "V8" Launch

The AIA product lauch - dubbed "V8" was all razzamattaz last night.

Jeremy Young negotiated his first major function as a national manager competently. He looked - as I guess almost anyone one would - just a touch wooden next to Candy Lane, the glamourous compere for the evening.

Michael Hewes knew he was putting on a good bash and seemed to be genuinely enjoying himself. He also had an iron grip on the schedule - a good sign in an event management situation.

Nick Scarlett with his hard-to-place accent courtesy of his international background had a hint of the James Bond about him.

The substance of the event was a cut in term rates, an increase in renewal commission, and some new packages. Applied to different demographic segments illustrated by dance routines.

Yes - you read it right - dance routines.

I shall ask AIA for a photo to blog. In the meantime trust me - it was good. It was also tasteful - in contrast to the 'naked-to-the-waist-and-spray-painted-gold' debacle by one insurer a couple of years ago.

There were a few bemused smiles amongst advisers not quite sure where to look at ladies dancing on a catwalk - at least, when in mixed company. I cannot confirm the rumour that one adviser had to be asked to stop waving a $20 bill at the dancers.

But advisers know how to enjoy a good show and it was well done.


NBR on Lebanon

The NBR messenger has a series of good links - all worth a look:

Before I leave the topic, in the interests of balanced reading, check out this selection from The Spectator:
Why Lebanese hate Hezbollah by Michael Young, opinion editor of the English language Daily Star in Beirut.
Why Hezbollah declared war on Israel
Why Beirut will recover by the Daily Telegraph’s veteran Middle East correspondent Richard Beeston, author of “Looking for Trouble,” his account of a 30-year career.
Why Islam is waging war against the West and Judaism, by David Selbourne, author of “The Losing Battle With Islam” (2005).


Aneel In India

Aneel's Amazing Odyssey in India is now being chronicled in an email he sends round to a few of us. I have cut this choice excerpt, figuring you'd rather hear how hard it is that read all about his chauffer, enormous business, and glitering prospects... ;-) Our arrival and setup in India has been a challenge. The biggest issue was getting the kids into the right schools. It is virtually impossible to obtain admission into any of the better schools. However, we were persistent and lucky. There were two schools that we got accepted into. The first being Podar International located in Santacruz West which was highly rated, but upon examination of the classrooms and facilities, we felt that the school resemble a prison rather than a primary school. The rooms had no windows, there was no light or colour anywhere, and we choose against this. The second option was Ryan International School located in Goregaon East. This school was in a new building, the children all looked happy, and even the teachers seemed friendly and helpful. So the children both go to this school and seem to enjoy it, except for Hindi classes for our eldest daughter, where she is a bit behind the others. Because of the location of the school, we moved into an apartment only 3 buildings away from it. It’s a new building, although from the outside it looks like it’s 5 years old. We are on the 9th floor, and enjoy some views of Mumbai City and some views of a National Park which is only 2 km away. (It’s the only National Park in the country with it’s own city zipcode). We are only 20 min away from the airports. 2 km from a Golf Course. 5 min from a shopping centre and movie theatre. Goregaon East is in the northern suburbs of Mumbai. It takes me around 25 to 30 min each day to travel to work. (Think of it like this – If downtown Mumbai is like downtown Auckland, then my office is located in Takapuna, and we live in Albany. The only problem is the traffic. To travel from home to downtown Mumbai takes around 1.5 hours, even though its only 30 km away. (If you translate the word ‘Goregaon’ it means ‘white man village’ – although I’m yet to see a white man in our neighbourhood) We’ve had a few problems with the apartment. Such as obtaining running water, electricity, gas, and furniture. But everything is ok now, and we are into a semi-normal routine.


Annuity Market Update

It is interesting to note the annuity market boom worldwide has not been replicated in New Zealand. In fact we do not appear to have a functioning market in annuities. A Wellington based researcher blames this all on the evils of the free market, and yes, there are some functional problems.

Believe it or not, people have much better information about their health than they think - even a kind of gut feel - and it does mean anti-selection is a real problem in this market. One actuary I know says you just cannot price for it in the fully voluntary environment we have right now. In the UK where retirees are required to take a portion of the proceeds from their retirement funds as an annuity this is not such a problem. So there is a role for the state in market-making.

Sadly there is also a much more prosaic reason for the problem: tax. In New Zealand there is a major tax barrier to annuity business taking off.

At present any financial planner worth the words would have to recommend against annuities on the basis of tax, unless their client was both very wealthy, relatively young, and very confident they will live a long time.


War

I understand that some readers find my odd ramblings into the dangerous territories of politics unwanted, difficult, or challenging. This is mainly about financial services, but I do - as you will have noticed - post on other subjects that may be of interest. Call it human interest. Actually, I am not going to write it, I am just going to post what someone else has written, because, largely, I think they've got it right:


Just the facts...

Fact 1: Hezbollah is a Lebanese, Islamist guerilla group and political party, a militant group with a stated objective of eliminating Israel. The civilian wing of Hezbollah has 23 seats (18%) of the Lebanese Parliament.

Fact 2: Hezbollah initiates attacks against civilans. The United States, Britain and Israel consider Hezbollah a terrorist organisation.

Fact 3: On July 12, Hezbollah soldiers crossed the border with Israel and captured 3 IDF soldiers and killed 8 more. Since then they have been firing rockets into Northern Israel.

Fact 4: Crossing the border with Israel is an act of war and Israel is within its rights to provide a response.

Fact 5: Under international law, Israel is permitted to provide a response that is in proportion to the threat. (Go back to Fact 1 - the threat is of 'total elimination').

Why is it then that we have to listen to the Lebanese on the nightly news crying about the destruction of their great and noble city of Beruit? (The Hezbollah is based in southern Beruit, in among civilan apartment blocks.) Perhaps the Lebanese should be directing their hatred toward their own Hezbollah for getting them in to this mess?  If I let a killer hide out in my house and the police have to demolish my house to get the killer - bad luck for me!

Hezbollah knew Israel would respond in the way they have, that is what the  Israeli's do.  Whether  Israel has over-reacted is a fair question but 2 things occur to me:

1. The threat Israel faces is 'total elimination', in the face of that threat, I believe any response can be justified, including 'total elimination' of the aggresor.

2. There wouldn't need to be ANY response if Hezbollah hadn't invaded Israel in the first place. You can't break in to your neighbour's house, kill their children and then believe that you have the right to dictate how your neighbour reacts. Once you cross the border (or break in to someone's house) you waive your right to be able to be an independant observer. You can either participate OR criticize but you can't do both."