UPDATE: Fisher Funds customers face cheaper fees from Tower tie-up

Carmel Fisher: new funds will be gradually rebranded

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Fisher Funds expects its customers to share the benefits of a larger business in the form of cheaper fees, having stitched up a deal to buy insurer Tower's investment business for $79 million.

Managing director Carmel Fisher told a media briefing in Auckland that funds management is a scalable business in that it does not take much extra resource to manage bigger funds.

Fisher Funds will almost quadruple its funds under management to more than $5 billion, making it the fourth biggest fund manager, with 8 percent of the market.

"Economies of scale will allow more efficiency and a better experience for clients, both in terms of cost and service," Ms Fisher says. Any efficiencies the bigger entity can achieve will be passed "on to clients with lower fees".

Taranaki-based TSB is supporting the purchase for an unspecified amount and will take 26 percent of Fisher Funds and get two directors on the six-seat board. That will make it Fisher Funds' second biggest shareholder, leap-frogging Wellington-based investment bank Morrison & Co, which did not participate.

Ms Fisher says it is too early to tell whether there will be any job losses from aligning the back offices of the two firms and she will be meeting with staff on Thursday.

The acquisition comes as the government reviews the default KiwiSaver schemes, including Tower, with Crown officials keen on aligning fund managers' incentives with long-term returns for investors. TSB's involvement in the acquisition echoes KiwiBank's purchase of Gareth Morgan Investments last year.

TSB chief executive Kevin Murphy says the bank has been looking at ways to increase its KiwiSaver offering and this is the best opportunity.

Tower has been looking to sell its investment business since it completed a strategic review last year as a means to provide value for shareholders, and comes after November's sale of its medical insurance unit to ASX-listed Nib.

Tower is scaling back of its business comes as cornerstone shareholder Guinness Peat Group liquidates its portfolio.

"The focus for Tower going forward will be on growing our traditional core insurance business through offering superior products backed by market leading customer services," managing director Rob Flannagan says in a separate statement.

Fisher Funds has the right to use the Tower brand of 12 months from settlement, scheduled for April 2, and will manage Tower's internal funds for five years. Those funds will gradually be rebranded, Ms Fisher says.


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5 Comments & Questions

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I'll believe the lower fees when I see them...

If i was a competitor I would be asking for the Tower share register and writing to all their clients asking if they want to jump ship. Those customers are up for grabs, just as the National Bank's were up for grabs at the time they transitioned to ANZ.

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Do Tower clients know what they are in for with Fisher Fund?

Fisher Fund track record with listed funds is there for them to see :

Barramundi - 30% below issue price years after listing.

Marlin - 30% below issue price too!

Fisher Fund - 18% above issue price years later.

Of course, the above funds are not included in the Fisher Fund website - too embarrassing.

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Has Ruhtra ever heard of dollar-cost averaging ? ( Fishers talk about this frequently). I've kept the faith...and done rather nicely out of the listed vehicles. No good only going in a $1 and then sitting around whinging while they are sold-off at sub-70c levels.

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Sounds like you are the perfect FF client - ignorant.

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Do they also explain that dollar cost averaging actually doesn't work if you sell in a falling market?

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