ISO plans overhaul after membership explosion

The Insurance & Savings Ombudsman (ISO) is in the process of overhauling its terms of reference after seeing its membership explode in the wake of new financial adviser regulation.

Thursday, April 14th 2011, 7:01AM

The regulations oblige registered financial advisers to be members of a disputes resolution scheme (DRS).

"We were established 16 years ago by the insurance companies and in six months we've effectively gone from 50 members who were with us for 16 years to over 1,000 members," said ombudsman Karen Stevens.

"Until after April 1 when we had a much better handle on the types of membership we had and the numbers we weren't in a position to do anything, but now going forward we've got to have a constitution and terms of reference that reflect the current membership. That's next on the drawing board, that's what we're moving into now."

Stevens was unable to say whether the changes would remove the clause five obligation that would see members - including financial advisers signed up to the scheme - financially liable in the event of the ISO's bankruptcy.

At a recent OnePath seminar the company's risk products sales manager, Steve Wright, said in that event "There's no limit to how much you will have to cough."

Stevens reassured that such an outcome was incredibly unlikely.

"Personally I would like to think there is absolutely nothing for any of our members to be concerned about but the clause five in our rules simply says that every participant undertakes to contribute in the event of the commission being wound up."

She said the rapid expansion of ISO membership and the new adviser regulations had thrown up several issues.

"The whole idea of not actually knowing what sort of membership we were going to end up with - the other complicating factor of course has been the QFEs - because we've had some advisers register who have been waiting until now to find out whether or not they were going to be the members or nominated representative of a QFE and where that QFE was going to go."

"We're aware that there are a number of issues that need to be dealt with now that were never an issue prior to the expansion," she said.

"To be quite honest we're taking a very pragmatic view of it and saying we know we've got to change, that's what we're going to do and it's simply a matter of doing it properly."

« IFA calls for (common) credit where its due

KiwiSaver mismatch a 'huge challenge' for advisers »

Special Offers