More regulatory madness
Friday, June 17th 2011, 4:12PM
by Philip Macalister
The MED discussion document on FMA levies landed quietly in my inbox last Friday. However its arrival had created a big bang in the industry.
The mainstream media may have ignored it, but it is big news for our readers.
The idea around the levy was no surprise – we had all been waiting to find out how much it would be and whether having a smaller number of AFAs than earlier predicted was going to inflate the cost for those that remained in the industry.
Here the officials have done a good job of managing the situation as they never gave any clue to what they thought the quantum of the levy would be.
Likewise we had been told, quite some time ago, that the FMA would have to be funded by the industry.
Maybe that idea hadn’t really sunk in until now. I recall we had written about it but until we saw the proposals the magnitude of this idea has only just dawned on everyone.
It seems absolutely wrong that the FMA should have to get all its funding from participants and none from the government.
What’s worse is that the government is proposing that all its recent funding is recovered. That is it has given everyone an interest free loan for a couple of years to set up the FMA and all the FAA bits now it wants its money back.
One person described it to me as like getting the criminals to pay for the justice system. Probably not the best analysis but the concept is right.
The government has foisted all this change on one sector of the industry – at huge cost in time and money, and now wants to add to that cost.
Advisers had no choice about it, other than to walk away and many have done just that.
The bottom line of all this is that advisers will have no choice but to recover the costs through increased fees to customers.
The other thing that gets me is the way this whole thing has been handled. I’m already on record expressing doubts about the necessity of all these changes and whether they will actually achieve the goals the politicians have set out. Likewise I am on record saying that the wrong part of the industry is being regulated. The problems have been with product manufacturers like finance companies.
What we see now is a proposal to get millions of dollars from advisers to pay for the FMA. Yet I see in the papers on the weekend the FMA isn’t even set up. It looks like all the staff have been chucked out and now are reapplying for their jobs. Frankly you would expect that the regulatory body, which advisers are paying for, would actually be set up and running by now. After all adviser regulation starts in 15 days.
You can read Philip's blog here: http://www.goodreturns.co.nz/blog/
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