MMG moves on from Money Managers

Doug Somers-Edgar founded Money Managers in 1985. Photo / Martin Sykes

Dropping the Money Managers name is not about running and hiding from the past, it's about reflecting the huge change the business has been through in the past 18 months, according to the financial advisory group's boss Derek Young.

The nationwide company, founded in 1985 by Doug Somers-Edgar on Auckland's North Shore, last week renamed itself MMG Advisory Partners after more than 20 years under the same name.

Young, who was brought on board initially as a consultant in 2008 to begin the process of changing the company, says the business has been completely altered from its ownership and governance to the way it gives advice.

"It is a fundamentally different business. We have re-engineered the business from end to end."

Young says the catalyst was a broader change in the financial markets and an awareness that the whole industry was set for a shake-up with new legislation expected to come in at the end of next year.

He said it had nothing to do with the collapse of the finance company sector or the problems MMG has experienced with its own frozen investments like Orange Finance or the Totara mortgage fund.

"We were already preparing for change when those problems hit."

It was June last year that interests associated with fund manager NZ Funds took a 40 per cent stake in MMG and a new board was set up with two MMG franchise owners, two representatives of NZ Funds and one independent director.

Money Managers founder Somers-Edgar had already pulled back his involvement although his family trust retains a beneficial stake in the company.

There are now around 50 parties with beneficial interests in MMG many of whom are advisers in the business.

Young says that ownership has been reflected in the new name.

But at the same time the business has taken a battering.

At its peak in mid 2007 MMG had 74 advisers and around $1.7 billion in funds under advice.

Now there are 55 advisers across 33 offices and funds have shrunk to $1.2 billion.

Young attributes the drop in adviser numbers to changes in the industry and an ageing adviser workforce although the Business Herald understands some advisers in the business also threatened to walk unless changes were made.

Young says he wasn't with the business when that happened so he can't comment. He is far more keen to talk about what MMG is trying to do now than dwell on its past problems.

But that doesn't mean it has forgotten about clients who do have frozen investments.

"I have met with a number of clients and am happy to meet with any others to talk about what we can do for them. We can't change the past but we are committed to doing what we can for them."

The majority of its investments are now run through its Assyst Portfolio Service which is managed by NZ Funds.

That, says Young, is designed to leave MMG focused on being an advice business.

It also means they are no longer involved in manufacturing investment products - a practice which the company had been heavily criticised for in the past.

"I think like most businesses we have gone through an evolution. They were designed to create opportunities for New Zealand investors that weren't there at the time."

He points out that not all clients have had a bad experience with Money Managers.

"We have also had products that have performed well."

He says those that haven't done so well like its former flagship First Step Trusts have done better than some in the finance industry.

First Step has paid back around 66c in the dollar depending on which of the six funds investors had their money in although chances of getting more money out of it remain uncertain.

But that is probably little consolation to those who have lost more than 30 per cent of their money in the trusts.

Young says the new focus will be on clients needs and goals to understand who they are and what they want to do with their money. "People have worked really hard and when they get to retirement it's about what is important now."

Young says there is now less of a focus on inheritance planning as people are living much longer.

"In the past people didn't want to spend their capital but now they have to."

Young says there is also a greater focus on protecting people's assets.

Its client research showed people were prepared to give up an extra 5 per cent gain if they could stop themselves from having a 10 per cent loss in the future.

That focus on protection has led the company to rely heavily on hedging its portfolios or paying a bit extra to stop losses going too far through insurance-like contracts.

Young says the business has also moved to a fee for advice model so there are no more commissions although some legacy products still have an ongoing annual service commission.

They now have around 15,000 clients of which around 12,000 are active.

While the majority of its business will be funnelled through its 40 per cent shareholder NZ Funds, Young denies MMG is a distributor or salesforce for NZ Funds. "We also have freedom in our business - we can access whatever products we want to."

While NZ Funds is the co-ordinating manager investors' money is spread among other fund managers both locally and internationally.

Young says there is no agreement that it must allocate a certain amount of money to NZ Funds although NZ Funds does get paid a fee to manage the money as well as gaining a dividend from MMG.

"If we believe we can get better client outcomes through using other products we will do it."

As to the MMG business itself Young says it has put on hold any ambitious growth plans and is focused on consolidation.

"We have made some significant changes to the business so it's now about steady sustainable growth."