NZ investment scene a history of 'betrayal'

Ralph Stewart says a lack of public confidence means money that could be invested in infrastructure is tied up in bank deposits.

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AXA Chief executive Ralph Stewart has launched a stinging attack on his own industry and the successive governments that failed to control it.

In From Crisis to Confidence, written by Stewart and other AXA executives, Stewart describes the investment industry's behaviour as "corporate betrayal" and blames New Zealand's dismal record as the slowest-growing investment industry in the developed world on a litany of missed opportunities.

A survey by the US-based Boston Consulting Group published last year showed that even in boom times before the financial crisis, New Zealand's investment industry had been growing at 5.4% a year compared to double digits in the US, Japan, France and Australia.

Household debt has spiked, said, Stewart, but: "Blaming New Zealand households is not fair. Rather, the blame should lie with successive governments who have failed to promote the development of a strong domestic financial services industry supported by a clear domestic savings policy.

"The blame also lies with the under-regulated financial services industry, which has failed to meet the needs of New Zealand consumers."

He said the majority of New Zealanders' savings were in simple bank deposits in contrast to the rest of the world where "as confidence and knowledge of savings has grown so has the diversity and depth of savings".

That pattern reflects the very weak "non-bank" savings industry in New Zealand, which has inspired little public confidence.

Diversifying what savings we have is critical, he argues, to improving infrastructure investment in New Zealand and breaking the "high-debt, high-interest rate spiral New Zealand is currently facing".

But some high-profile failures had set that back, including "a joint venture that suffered a massive and very public failure impacting thousands of mum and dad investors to the tune of $500 million" in which investors "were led to believe they were invested in what appeared to be lower-risk investments".

That's a veiled reference to the Diversified Yield and Regular Income funds offered by rival firms ING and ANZ bank, which had to compensate investors after losing huge sums on risky debt securities.

"In short, the advisory industry has failed New Zealand savers and investors in the same way as corporate investment houses, failing to strike the right balance between benefits for investors and the benefits for the business owners."

Stewart says the outlook is improving however, with the last government having belatedly begun better regulation of advisers and investment businesses.

"The savings and investment industry must now step up to the challenge of providing New Zealanders with world-class products and services that are fairly priced and well managed. The mistakes of the past two decades can never be repeated."

From Crisis to Confidence, published by Penguin, $40, is written by advisers, executives and investment experts from the AXA group of companies, including AXA Global Investors and advisory firm Spicers.

- © Fairfax NZ News