|        About Good Returns  |  Advertise  |  Contact Us  |  Terms & Conditions  |  RSS Feeds

NZ's Financial Adviser News Centre

GR Logo
Last Article Uploaded: Sunday, October 25th, 10:00AM


Latest Headlines

Advisers fear IFA’s help could haunt them

Advisers are concerned voluntary guidelines issued by the IFA could be used against them if they get sued by clients or find themselves in trouble with the FMA.

Thursday, October 13th 2011, 5:00AM 12 Comments

by Niko Kloeten

The issue was raised yesterday at the institute's professional development day in Auckland, where president Nigel Tate outlined the IFA's latest guidance.

It was prepared in light of recent court judgments that caused uncertainty among advisers, particularly the Armitage v Church case, which the IFA's lawyers reviewed extensively.

Tate joked that the lawyers' response to the judgment had been "thou shalt not give any advice as there is too much risk."

Instead of heeding this advice and packing it in altogether, the IFA put together new recommendations on how to deal with a range of potentially hazardous issues such as risk profiling, scope of advice and diversification.

Tate emphasised that the guidelines are voluntary and advisers aren't bound by them, unlike the code of conduct.

One attendee asked if "members are free to ignore the guidelines if they wish", to which he replied, "absolutely," and later added, "they are guidance not rules."

He said, however, that it could be useful if advisers ended up in court to be able to say they had followed the IFA's practice guidelines.

But advisers are worried the guidelines themselves could put them in the firing line, if they choose not to follow them and later get sued or prosecuted and the court wrongly regards them as rules.

When questioned about the issue yesterday Tate said the institute would be working hard to make sure the FMA understood the voluntary nature of the guidance.

Another concern among advisers at yesterday's conference was how much research they needed to do and how many investment products they needed to look at before making recommendations to clients.

"I don't think there is a requirement for us to assess every single option," Tate said.

"We are not investment analysts, we are financial advisers and it's more about building relationships and filtering out the techno speak and translating it into English or Mandarin or whatever.

 "We all have our favourites but it's not because we get 5% rather than 2% but because we have experience with it [the product] and our experience has been positive."

Niko Kloeten can be contacted at

« Adviser commission ban recommended by Commerce CommitteeKiwiSaver mismatch a 'huge challenge' for advisers »

Special Offers

Comments from our readers

On 13 October 2011 at 7:21 am Independent Observer said:
2 issues arise from this article:

Once again the IFA has presented itself as a voluntary organisation with little/no teeth. I wonder what its ongoing value proposition will be to attract & retain members. Conferences?

I am concerned with the suggestion that advisers “all have their favorites” – and that this approach to portfolio construction is adequate for both clients and the courts. I would have thought that part of the adviser’s value proposition is to continually monitor the most appropriate capabilities for their clients… requiring regular exposure & updates to existing & new solutions. This is a lot of work, and requires a more robust approach to research than simply relying upon “old favorites”
On 13 October 2011 at 11:22 am RFA & Happy About It said:
Yet MORE evidence - it just keeps piling up - against having anything to do with investment advice...
On 13 October 2011 at 11:53 am Dave said:
Yesterdays discussion was useful for all in attendance. The approach that IFA was taking was in response to AFAs questions/concerns as to how to deal with a few specific situations. The issues will always lie where the ground is gray. Research was one of the points discussed, and it was clear that where research is available and reliable it can be used, otherwise AFAs should provide their own research. This provides challenges as to what constitutes 'adequate research'. I imagine that this is causing confusion with all AFAs and will become clearer over time. Another reason why only appropriately competent individuals should be providing investment advice to customers. Thanks to IFA for providing the base for this discussion.
On 13 October 2011 at 12:26 pm Craig Simpson (Dentice Simpson Consulting Ltd) said:
I strongly suggest the IFA review their comments re not assessing every option.

From the Armitage v Church case the Judge gave a very clear message to advisers (and financial institutions) that they must consider a wide range of products and services in order to meet their requirements under the legislation. In instances where a financial adviser does not research a product or service then they may rely on a third party research provider provided they are satisfied they are competent. If said third party does not research a particular security or product, this would require the adviser to perform their own detailed analysis and provide recommendations to the client.

Advisers cannot ignore or eliminate a product because it does not get coverage by a third party research house. There is a plethora of products not researched by research houses.

For advisers not to perform their duties properly could be construed as negligent.

On 13 October 2011 at 1:00 pm w k said:
my personal view: based on 1) the amount of $$$ needed to be complied (non-income producing time spent on compliance MUST be added to compliance costs), 2) assuming sole advisor with one admin staff & one personal assistant, and 3) 50m2 office at the fringe of city, if the practice do not make over $350k income, it is not worth it. it would be far better earning $200,000 as an RFA, work from home, refer all investment clients to QFEs, watch at the sidelines, and see what happens after a few years.
On 13 October 2011 at 5:44 pm traveller said:
How many advisers have the background knowledge, skill and access to the information neccessary to do "adequate" research? And if the domestic market is hard enough, what about the daunting prospect of tackling the vast list of overseas options? ETFs alone would be a nightmare.
On 13 October 2011 at 8:31 pm Reasonable said:
I love my favourites....

The Magellan Global Fund is a legend. 10 stocks represent 58% of the fund. Of course it is broadly diversified. Let this be a lesson to you main-street fullas - global share funds should hold less stocks! There might be roughly 10,000 stocks in the global investible universe - but to be sure 9,980 of them will be dogs.

Also look at my mate Kerr. He runs the perfect global share fund. Long, short selling, net, currencies, and all managed from an Australian perspective....... These are the things that main global share managers need to be talking about to their Kiwi clients!
On 14 October 2011 at 10:48 am Rob said:
Good on the IFA for taking a leading role by issuing guidance notes to benefit advisers and provide clarity in the current enviroment.

Just a shame Tate opens his mouth before he thinks ...
On 14 October 2011 at 4:29 pm Craig Simpson (Dentice Simpson Consulting Ltd) said:
Reasonable - I too have a soft spot for Platinum but you need to realise that these guys have not added any real value to a client portfolio in recent times - in fact they have detracted value through their currency and short positions. Therefore, if you do recommend them you have to ask are you doing the best thing for your clients? You may wish to consider blending Platinum with another long short or long only manager. I have done this work with a US$ long only manager (Goldman Henry US50 Fund - I am a director of this fund) and I have seen it done with the K2 Select International Fund promoted in NZ by Clayton Coplestone @ Heathcote Investment Partners. Once you see the results from this blending work you may well change your views on Platinum. I am happy to share my work with you if you need convincing.
On 16 October 2011 at 11:13 pm Reasonable said:
Interesting Craig. I had a look at the wed site for the US50 fund. I haven't seem redeemable preference shares before. What is the logic here?

Also, where does the Goldman come from in the name? I had assumed this was a Goldman Sachs fund (not that this was necessarily a positive!).
On 17 October 2011 at 4:25 pm Forty-two said:
It seems that financial advisers are now responsible if an investment that they recommend heads south ... was that the intention of the legislation? If so, then why would anyone want to be in this industry?
On 1 November 2011 at 3:50 pm Tim Williams, Partner, Chapman Tripp said:
For further guidance on the consequences of the Armitage v. Church decision, see Chapman Tripp's Brief Counsel on the case, which can be found at

Commenting is closed



Printable version  


Email to a friend
News Bites
Latest Comments
Subscribe Now

Weekly Wrap

Previous News
Most Commented On
Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA 4.55 2.55 2.69 2.79
ANZ 4.44 3.15 3.25 3.39
ANZ Special - 2.55 2.69 2.79
ASB Bank 4.45 2.55 2.69 2.79
Bluestone 3.49 3.49 3.49 3.49
BNZ - Classic - 2.55 2.69 2.79
BNZ - Mortgage One 5.15 - - -
BNZ - Rapid Repay 4.60 - - -
BNZ - Std, FlyBuys 4.55 3.15 3.29 3.39
BNZ - TotalMoney 4.55 - - -
CFML Loans 4.95 - - -
Lender Flt 1yr 2yr 3yr
China Construction Bank 4.49 4.70 4.80 4.95
China Construction Bank Special - 2.65 2.65 2.80
Credit Union Auckland 5.45 - - -
Credit Union Baywide 5.65 3.95 3.85 -
Credit Union South 5.65 3.95 3.85 -
First Credit Union Special 5.85 2.95 3.45 -
Heartland 3.95 2.89 2.97 3.39
Heartland Bank - Online 2.95 1.99 2.35 2.45
Heretaunga Building Society 4.99 3.50 3.40 -
HSBC Premier 4.49 2.45 2.60 2.65
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - - - -
ICBC 3.69 2.45 2.65 2.79
Kainga Ora 4.43 2.93 3.07 3.24
Kainga Ora - First Home Buyer Special - 2.25 - -
Kiwibank 3.40 3.30 3.54 3.54
Kiwibank - Offset 3.40 - - -
Kiwibank Special 3.40 2.55 2.79 2.79
Liberty 5.69 - - -
Nelson Building Society 4.95 3.45 3.49 -
Pepper Essential 4.79 - - -
Resimac 3.39 3.35 2.99 3.35
Lender Flt 1yr 2yr 3yr
SBS Bank 4.54 3.05 2.99 2.99
SBS Bank Special - 2.55 2.49 2.49
The Co-operative Bank - First Home Special - - - -
The Co-operative Bank - Owner Occ 4.40 2.55 2.69 2.79
The Co-operative Bank - Standard 4.40 3.05 3.19 3.29
TSB Bank 5.34 3.29 3.45 3.59
TSB Special 4.54 2.49 2.65 2.79
Wairarapa Building Society 4.99 3.55 3.49 -
Westpac 4.59 ▼3.09 3.29 3.39
Westpac - Offset 4.59 - - -
Westpac Special - ▼2.49 2.69 2.79
Median 4.55 2.94 2.99 2.80

Last updated: 23 October 2020 5:00am

About Us  |  Advertise  |  Contact Us  |  Terms & Conditions  |  Privacy Policy  |  RSS Feeds  |  Letters  |  Archive  |  Toolbox
Site by Web Developer and