KEY POINTS:
Wellington computer programmer Mike Dilger could be forgiven for thinking that Lady Luck had something against him.
His first experience of investing in shares was a disaster - he lost almost all his money in the dotcom crash.
When he accumulated another $80,000, he decided to go for
what he thought was a safer bet - fixed-interest debentures in two finance companies, Provincial and Bridgecorp.
Dilger has an excuse for not knowing much about the investment scene here - he is an American who moved here two years ago "because Kiwis seem to me to be very level-headed commonsense-driven people, and the country itself is stunning."
He is relieved that he will get back most of his money from Provincial, but when he discovered Bridgecorp had also been placed in receivership "my initial reaction was my stomach fell through my gut, and shock, because this was two out of two that failed, and initially I just didn't understand how this could happen."
He is understandably angry at Bridgecorp's management, but also furious with the popular website www.interest.co.nz.
The reason he picked Bridgecorp, he says, is because it had an AAA rating from what he now knows is the website's own scoring system, known as SQP. The rating, which was downgraded to BBA earlier this year, was widely publicised by Bridgecorp in its promotional material.
Dilger says he sent the owner of the website, David Chaston, an email telling him what he thought of SQP, but Chaston didn't bother to respond.
Other industry commentators have also questioned the SQP score. Rotorua-based financial publisher Phil Macalister was critical of the AAA score for Bridgecorp at the time it came out, and in February, Kapiti Coast sharebroker Chris Lee stated on his website: "Under no circumstance should any investor select a company based on the SQP score."
Chaston told The Business he was sticking with SQP, as he believed it did "more good than harm".
He said it was not intended to be a credit rating. People were "completely dopey" if they were using the score as their sole decision-making tool and "extraordinarily naive" if they were putting more than 5 per cent of their savings into any one finance company.
"This all is naive financial education ... but if we scrapped it, what would people use? Should they simply be relying on the television advertisement they like the best?"
Chaston believes the answer lies in expanding the NZX debt market, where continuous disclosure is already required.
But NZX chief executive Mark Weldon is incredulous at the suggestion. The problem, says Weldon, is not a shortage of debt, but incompetent financial advisers, and that "these companies can go out there and raise money at the same rate regardless of their financial health because they don't have to tell their investors what's going on."
Dilger admits he has learned some lessons about investing and wants others to benefit from his mistakes. He realises Bridgecorp's complex internal structure should have rung alarm bells, but he would also like to see better monitoring of finance companies' liquidity. He is also surprised at how commonly trusts are used here to protect personal assets.
"I think trusts are a terrible institution because they hide liability, and people need to be liable. And corporations need to be liable too. The buck has to stop somewhere - it can't just vanish."
