by Rob Hosking
Sandler is not keen on large disclosure documents; he is though keen on designating who can and can’t call themselves an ‘independent adviser” or some other professional term. And it should exclude those who receive commission from providers, he says.
“The principle relationship should be with the client, not the provider,” he says.
“Taking commissions confuses the role of the adviser – it doesn’t put them fairly and squarely in the shoes of the consumer, and its not about getting the best deal for the consumer,” he told a seminar in Wellington organised by the Retirement Commission.
“So trust is undermined in the process.”
And – worldwide – he says the financial services industry has an issue with gaining the trust of the consumer.
“Consumers are daunted by their engagement with the industry; they are distrustful and they fail to understand what it is they are being sold and that fuels their mistrust.”
Sandler also says what is on offer from product providers has become increasingly opaque and complex. “That would be less of a problem if advisers were able to step into the gap but they can’t and the reason is because advisers are selling on commission.”
He advocates advisers selling their services on a fee basis, but that fee being paid when a sale is made.
Disclosure and other rules does not help much, he says.
“We have built a very elaborate structure of consumer protection and it adds an awful lot of cost. And in the end the consumers have been priced out of the market. Which does protect them in a way, although its a very perverse outcome.”
Over-aggressive pronouncements s from a regulator can also be unhelpful, he says.
“The Financial Services Authority has been a significant contributor to the mistrust we have in the UK savings industry. Because they don’t want to be criticised if another scandal breaks they have been quite aggressive.”
News of what the task force is up to has got to Gareth Morgan riding the Silk Road on a motor bike. He has sent out a press release from Xanadu, China. To see what he has to say go to ASSET Magazine
Rob Hosking is a Wellington-based freelance writer specialising in political, economic and IT related issues.
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