Inside Money: Aussie funds research house closes one door on NZ

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Australian-based retail managed funds research outfit Lonsec has bailed out of the New Zealand market citing lack of commercial viability.

However, Lonsec Research sister company, SuperRatings, (both sit under parent firm Lonsec Fiscal) will push on with its KiwiSaver project, first reported here last May.

Newly-appointed Lonsec Fiscal co-CEO, Amanda Gillespie, said the "commercial side [of Lonsec's NZ retail fund research] has not supported the resources needed to maintain it".

"There's more demand and growth in the KiwiSaver market and we decided to prioritise that," Gillespie said.

Lonsec, along with rival Australian funds research firm, van Eyk, entered New Zealand about five years ago, soon after the introduction of new legislation governing the local financial advisory industry.

In theory, the newly-regulated advice sector should've boosted the market for independent financial product research in New Zealand as the rules require advisers to justify their investment recommendations.

Across the Tasman, fund research houses are vital cogs in the retail financial services machine - most products require a researcher stamp of approval before advisory business will look at them.

But even in Australia, where a much larger population of financial advisers have been regulated for decades, retail managed fund researchers have never had it particularly easy.

With only about 1,900 authorised financial advisers, most of whom operate under the auspices of large institutions, New Zealand was always going to be a tough proposition for purveyors of fund research.

Lonsec's exit from New Zealand should ease the pressure for the remaining competitors: van Eyk, which now operates the former Perpetual advisory business in NZ under its own name; the long-established global firm, Morningstar, and; the NZX-owned FundSource.
Meanwhile, Lonsec's Gillespie said the SuperRatings KiwiSaver research will now be managed by Adam Gee following the departure of Darren Howlin, who previously was responsible for the NZ business.

Gillespie said the research would be sold direct to KiwiSaver providers at first, although it may also be offered to financial advisory firms.