19/10/2004 - 22:00

Broker woes

19/10/2004 - 22:00


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As financial services providers grapple with Financial Services Reform legislation, those within their ranks who have studied organisational behaviour might recall Pavlov’s Dog.

As financial services providers grapple with Financial Services Reform legislation, those within their ranks who have studied organisational behaviour might recall Pavlov’s Dog.

Pavlov’s Dog is the hapless victim (or more likely victims) of 19th Century experiments on conditioned reflexes.

Ivan Pavlov, a neurosurgeon by training, developed the theory of conditioned reflexes that showed that an automatic response could be triggered in animals by conditioning them with associated stimuli.

For example, a dog that salivated when food was present could be conditioned to salivate when a bell was rung. This was done by ringing the bell immediately before feeding, so the animal associated the bell toll with food and started to drool.

Perversely, Professor Pavlov, who later won a Nobel Prize, also proved that this conditioning could be undone by dropping acid on the dog’s tongue after a bell was rung.

More alarmingly, Professor Pavlov also showed that this negative stimuli could provoke a response so strong that the dog would override its own unconditioned reflexes such as the instinct to eat and actually starve. At least, that’s my recollection assisted by some web-based research.

So what has this got to do with FSR?

For the past year, financial services providers embraced by FSR changes (that is basically everyone except real estate agents) have been battling with the huge paperwork requirements to ensure that clients are fully informed.

Now, it appears, the regulators are set to take some providers to task for providing too much paperwork (see story on page 13).

It’s enough to make a broker stop salivating at the sight of a new client.

West’s options

Speaking of salivating, the Federal election result has got a lot of share market investors excited – especially those interested in media.

With the prospect of laws restricting media ownership being dropped or dramatically scaled back, speculators went wild with the idea of all the possible mega-mergers of television and newspaper companies across the nation.

WA Newspapers Holdings Limited, the owner of State daily The West Australian, is one that enjoyed the ride, getting a top-up on the already buoyant times it has had in the market of late.

It seems it is WA News’ independence, isolation and rather full value – not media ownership rules – that have largely left it without a suitor, or at least a successful one.

But that hasn’t stopped CEO Ian Law progressing with expansion via acquisition even as he has been chatting with lads from Fairfax about a bigger deal.

We’ve seen the purchase of some regional radio stations and Quokka in recent times, but the word is that those were just practise runs for something bigger following the lack of progress with Fairfax.

Mr Law, naturally declined to comment on rumours of a $100 million deal, which is understandable given the nature of ASX disclosure these days.

We can speculate of course.

A possibility might be a regional television broadcaster to complement the purchase of radio group Redwave Media. Alternatively, it could try to take out the 51 per cent of Community News which it missed out on in 1998 when Kerry Stokes knocked back $32.5 million to sell the stake to News Corp but that is unlikely to top the $100 million mark, is it? Even if the Murdochs are looking for money.

It’s hard to see too many other big media deals in WA and one area where current media ownership rules would be expected to stop expansion is into metropolitan TV. So nothing could change there until a new Senate is installed and media ownership laws are changed, which is not certain.

I did try to imagine that the web might be an area of expansion, along with associated transaction and information-based IT. But there are few big ticket players in Perth and the major IT players would be hard-pressed to fit a profile that the WA News board would be comfortable with.

It’s all food for thought.


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