I ran into a guy at the airport the other day who holds (and has held other) significant senior management roles in the savings industry.
We got talking about the state of affairs - as one seems to do these days - and the role of advisers, particularly with regards to Bridgecorp.
Both of us agreed that advisers and the leadership of this sector have not done enough to sooth investor sentiment. As I wrote on the Weekly Wrap two Fridays ago, all advisers are coming under attack at the moment. While I believe this is unwarranted there is a need to front foot the issue.
Bodies like the IFA - who pitch themselves and their members as the peak professional body representing advisers - have two broad tactics they could employ.
One is bury their head in the sand. The second is get out there and stand up for advisers.
I will leave it to readers to suggest which option has been taken, indeed it maybe somewhere in between.
My challenge to the advisory industry is this. If their proposition to the public and one of the “unique-selling points” is that advice is good and the public should use the skills of someone who is professional, abides by a code of ethics and belongs to an organisation which has a complaints process then they should be out there and be saying, loudly, to the public if you have a complaint come to us and we will promise to investigate it.
It's well and good saying to your members yes we have a complaints service and we have very few complaints. But if you don't let the investing public know it’s there and what it does then they won't use it.
Perhaps the downside is that an organisation could end up losing members and end up in a weaker bargaining position when adviser regulation comes into play.
But, hey, if you promise to represent the best in the business, maybe it is worth shedding some members who don't come up to scratch.
The reality is about one third of any profession or trade are very good, one third are OK, and one third should go and do something else.
However true professionals do not criticise their competitors.
The biggest problem seems to be some publicity seekers within our industry who "market" themselves by publicly critising their competitors.
Seems to me we should not be drawn into talking about our competitors but rather show the potential client what we individually have to offer, and that we are ethical.
Market forces and upcoming regulation will eventually drive most advisers who are not up to scratch out of the industry.
However there will always be some less-than-ethical people in any industry - its mpossible to weed them all out.
On 17 September 2007 at 7:57 pm Barrington Smythe said:
So what you're saying is that organisations like the IFA should continue to represent advisers who fall into the worst third of your profession? It is exactly these people who are making life difficult for the OK or good majority. True professionals should above all stand up for an ethical financial advisory profession that is beyond approach.
If you know that your competitor is selling Bridgecorp, or ginseng farms or whatever and you think that's unethical, the professional thing to do is to make a formal complaint and have the adviser concerned disciplined, or at the very least question his advice.
It is a fundamental problem of your industry that nobody is willing to condemn advisers who have clearly demonstrated either gross incompetence or deliberate misleading of clients for their own financial gain.
The whole point of this debate is that if organisations like the IFA want to be seen to be representing the best advisers, they cannot possibly entertain representing the 'worst third'.
I think the financial advice industry is different to any other trade or profession. I can't think of another (including lawyers and accountants) where there is such a large fiduciary duty to your clients. They are entrusting you with (in most cases) all the liquid assets they have, and that puts you in a position of immense responsibility to do the best by your clients, and not to lose their money by recommending clearly unsuitable investments in return for large commissions.
In the end it may be impossible to weed out all the unethical people in your profession, but that doesn't mean you shouldn't try!!
On 18 September 2007 at 8:41 am Alan Clarke said:
Mr Barrington Smythe's comments above require a reply
Firstly around two thirds of "advisers" in NZ are not members of the IFA
(under current law anyone can call themselves a "financial adviser')
Secondly most IFA members have no way of knowing who is acting unethically or taking big commissions - the privacy act and all that
So without knowing who is unethical and without proof what can IFA members do ? very little - and even less about the 3,000 or so "advisers' who are not IFA members
However surely the policing of the industry falls on the appropriate bodies such as the securities commission and the govt in putting in the appropriate regulatory framework (coming in 2010)
In a perfect world we would identify and drive out the shonky advisers
Unfortunately it's not a perfect world and it's not that easy
However all is not lost - investors can find a good adviser by doing some checking first - checking the advisers qualificaitons, reputation etc - it's not too hard
Lots of people do soem checking that when looking for a builder, painter, lawyer , etc - it's prudent
3 Comments
The reality is about one third of any profession or trade are very good, one third are OK, and one third should go and do something else.
However true professionals do not criticise their competitors.
The biggest problem seems to be some publicity seekers within our industry who "market" themselves by publicly critising their competitors.
Seems to me we should not be drawn into talking about our competitors but rather show the potential client what we individually have to offer, and that we are ethical.
Market forces and upcoming regulation will eventually drive most advisers who are not up to scratch out of the industry.
However there will always be some less-than-ethical people in any industry - its mpossible to weed them all out.