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BOS puts advisers’ in hot seat over frozen funds

Financial advisers played a prominent role in the ING frozen funds debacle through mis-selling and poor advisory practice, according to the Banking Ombudsman Services (BOS) annual report.

Tuesday, November 1st 2011, 11:43AM

While also citing the unforeseen impact of the global financial crisis, advisers were singled out in two bullet points, with the BOS saying there was clear evidence that "some advisers mis-sold the products, representing them as less risky than they were" and "some advisers engaged in poor advisory practices."

BOS found some advisers signed less sophisticated investors up to the funds without sufficient explanation of the risks, while some recommended allocations in excess of the 20% considered appropriate for low to moderate risk investors.

"Unfortunately, the risks associated with the funds were much higher than many investors - and some advisers - understood," said the report.

Ombudsman Deborah Battell told Good Returns she was reluctant to apportion blame in any particular direction, though "one of the very obvious things was the fact that there was clear evidence of mis-selling."

She said one of the key lessons from the failure of the two funds - the Regular Income Fund and the Diversified Yield Fund - was "ensuring that advisers and customers are kept up to date with any changes to the composition of funds and associated risks."

Battell also said that thanks to the ING investigation, BOS now has "a large amount of experience in assessing disputes involving financial advisers."

"I think we're in an even stronger position in a number of ways," she said.

"One is that we have learnt a huge amount about investment complaints, about investment advisers and investment advisory practice and so we are now, of all the disputes resolution schemes, we're the one that has actually got the hard experience in terms of assessing these claims.

"We do have hundreds of financial advisers that belong to our scheme as a result of their being part of a bank, all of their financial advisers are listed separately with our scheme, so I think that the public can have high levels of confidence in our ability to assess investment related complaints."

 

 

 

 

 

 

 

« Regulation poses relevancy challenges for professional bodies KiwiSaver mismatch a 'huge challenge' for advisers »

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