[Weekly wrap] Measuring up advice standards
What an interesting week it has been with more on the latest court case against an adviser who was ruled to have breached the rules - and consequently been whacked. Then today we are told that the Government has probably flunked the standards too.
Friday, August 17th 2012, 8:30AM
by Niko Kloeten
Yesterday Hamilton-based adviser Rodney Hartles told his side of the story which landed him in court and with a $90,000 fine.
In the statement Hartles defended his position, while acknowledging his lack of documentation left him vulnerable to the subsequent court proceeding.
(Click here for the full High Court judgment)
This is a valuable reminder to other advisers that paperwork isn't just about keeping the FMA off their backs; in a he-says-she-says situation like this one it can potentially save you a lot of hassle and money.
The case is quite different to Armitage v Church as this is more about the process (or lack thereof) rather than about investments in finance companies per se.
What if the government were a financial adviser and the FMA came knocking on its door for an audit? How would it rate?
This was the question Paul Mersi put to the Workplace Savings NZ conference in regards to KiwiSaver, where the government is the "de facto adviser" for hundreds of thousands of default scheme members.
Mersi pointed out that while the government has imposed strict standards on advisers giving investment advice, it doesn't seem to be living up to those standards with the default scheme.
And just a thought. There's probably more people in default schemes than the total number of people who use the services of AFAs.
These standards the government has applied to financial advisers are putting some off doing pro bono work, with those volunteering to provide free advice during the upcoming Money Week doing so on the basis they will provide non-personalised class advice only.
With no regulatory distinction between paid advice and advice given for free, advisers say the risks and time involved in doing pro bono work don't stack up. This is unfortunate as pro bono work would be a great way to promote the industry and the importance of financial advice. The work done by advisers in Canterbury after the earthquakes has shown the public goodwill such a programme can generate.
Sometimes it seems like all we hear about in New Zealand is the exodus of people to Australia, but one financial adviser who has made the opposite move says this country has more going for it than it thinks. For one thing, he says Australia has become too expensive and New Zealand's cost of living is much lower (Aucklanders might not think so but Melbourne and Sydney in particular are more expensive).
His comments around New Zealand's attractiveness to global financial services professionals are interesting because the government has always been keen on the "financial hub" idea but it doesn't seem to have gone anywhere. In the internet age the tyranny of distance is no longer much of a factor in finance and New Zealand should be thinking of ways to capitalise on its natural advantages.
Meanwhile, IRG has sold its Tauranga advice business to one of the advisers Adrew Parkinson who is an RFA.
IRG (BOP) was previously the financial planning business set up by Phillip King, known as Ellerie Cornwall. IRG has been struggling for years and has essentially given up the ghost, with its plan being to sell its assets and remain a listed shell. With the financial advice industry tipped to experience KiwiSaver-led growth in the next few years, this probably isn't a bad buy.
In deposit rates news, Blue Star plans to keep its hapless bondholders in the dark about business developments by de-listing the bonds from the NZX. This is surely the knockout blow to punch-drunk bond investors who have taken several heavy hits in recent years.
Niko Kloeten can be contacted at email@example.com
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