by Rob Hosking
The paper says that while there are some reforms might apply to all intermediaries, a uniform approach “is difficult to justify, particularly in relation to information-only roles.”
The options paper outlines three “reform proposals” – enhanced consumer information; enhanced redress, enforcement and sanctions for rules; and higher standards.
Those are the overall goals, Task Force Chairman Michael Webb told Good Returns, and how those goals are achieved depends on the type of transaction taking place.
A financial adviser acting in an “information only” capacity will have a different set of rules than one acting as a product marketer or a financial adviser.
The terminology used to describe such roles looks set to become a major discussion point.
One option put forward in the paper is tighter rules around use of certain occupational titles - such as “financial adviser” - unless the user meets certain standards and is registered.
Webb freely acknowledges the influence of high-profile financial commentator Gareth Morgan in the Task Force’s decision to put that change up as an option.
“That’s an argument Gareth Morgan in particular has made. You can understand the reasoning – one of the main issues is conflict of interest and maybe a consumer might think an adviser is independent but they have a lot of other drivers on them.
“Having some rules around who can call themselves an adviser addresses that.”
However he points out that Australia, for example, has tried this approach and the results have not been particularly helpful.
“The Australians have restricted the term ‘independent’, but there’s been very little uptake of that term.”
And while he notes a reluctance by financial advisers to take that option may be understandable, because it would involve severing many commercial relationships, Webb points out that “there doesn’t seem t be a huge demand for by consumers either – although perhaps its early days.”
Overall though the report points in a clear direction: it divides the role of financial intermediary into those three categories – “information only”, “product marketer” and full-blown financial adviser – and it is clear that the third will have more onerous requirements placed on them.
Rob Hosking is a Wellington-based freelance writer specialising in political, economic and IT related issues.
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