It seems the financial services industry just got a bill it wasn’t expecting in the Budget yesterday.
As Good Returnsreported the government is coughing up $9 million for the regulation of the advisory sector and is expecting the industry to pay an additional $4 million.
It seems that this bill has come as a surprise to the industry. What’s more it is unclear who is going to pay it and what the money will be used for. (If you have any ideas please let me know!)
I would have thought if the government decided it was going to go down the imposed regulation route, as it is doing, rather than the co-regulatory approach it had been traveling, then they should pay for it.
It’s just not good customer service to give someone something they don’t want and then bill them.
After years of discussion and consultation it seems that not a lot of positive progress has been made with tightening up the sector. It may look good that the government is making noise about “investor protection” but it all sounds a little hollow to some at the moment.
I know people from EUFA and the likes would certainly agree with the proposition that the government and officials don’t care, but I don’t go that far.
Things are happening, but unfortunately the wheels of justice are slow to turn, and the results often don’t help the investor who lost money.
With an election coming up later this year, I wouldn’t be surprised to see some politicians pick up on what has happened in this sector to push their own barrows.
My guess is that it will be attractive to Winston Peters. Many of the elderly people in Tauranga seem to have suffered with meltdowns in the finance company sector and with Blue Chip.
Also it’s not a new plank for Peters as I recall a couple of general elections ago he campaigned against advisers. Maybe the same will happen again?
If they want to regulate, pay for it. If they had included all advisers across different industries, I assume it would have been cheaper.
On 23 May 2008 at 1:50 pm Geoff said:
It appears a band aid is once again proposed by Labour, in it's dash to the polls.
What would be interesting to know is how it arrived at these costs, after ignoring once again an industry who have been in comprehensive consultation for the last few years with the Government only to have all discussions, ideas etc thrown out the window, so they can release their (I can't believe it, what a shock !) hidden agenda of licensing Advisors controlled by the Government.
The costs could be spread between both suppliers of products and the Advisors who sell/recommend these products.
Once again we need the detail, to see what impact this will have if any.
My belief is all costs incurred above will again be passed onto the end consumer, in either a price increase, a fee charged for service, or both.
This will have the most effect on the bottom quartile of the population, who are represented well already in being under insured, and having little or no investments.
For the record I am a self employed Insurance and Mortgage Advisor of 12 years.
On 26 May 2008 at 12:35 pm John said:
The government came to the conclusion that the industry bodies were not mature enough to partner with and act as regulating (or co-regulating) bodies.
After seeing some of the behaviour of these bodies in the last six months it became obvious that some were too focused on their own interests and couldn't be relied upon to do the right thing when those interest conflicted with the needs of the consumer.
Why should the industry pay?
Why shouldn't it!
Regulation is necessary because of public pressure to act following the spate of collapses in financial services industry and general poor behaviour from industry participants.
Feel free to whinge about paying for the small minority but how is that different from any other laws.
On 27 May 2008 at 9:15 am Keith said:
There seems to be a beat-up by the Govt about how necessary the bill is with all the finance company collapses and some possible dodgy dealings from a handful of investment brokers.
The best way they see to overcome this is by Government control on licensing.
Maybe it's a good way of dealing with it and maybe it isn't by where is the logic in including writers of just risk insurance in the whole deal? NZers are underinsured enough as it is (because, unlike fire & general insurance, life and disability insurance has to be sold rather than being bought) without making it more difficult and, it seems, more costly for advisers to remain in business.
On 28 May 2008 at 7:20 am Murray Weatherston said:
Phil the Government's estimated cost to the advisory industry of the new regulations might be less than the numbers you have quoted. Close reading of the ministers press statement says the costs of implementing "new laws to improve the supervision of financial advisers and institutions". So it seems to me not all the costs will be for we advisers. Also this is spread over 4 years.
My comment is not to trivialise the amount but rather to show it might not be quite as bad as it seems.
I wonder whether you couldn't set your bloodhounds on the trail of the actual calculations Government did to come up with the numbers for the industry ($5.1m opex and $1.4m capex. I know I could probably do this myself, but you will be far more adaept at getting info out of Government departments and making OIA applications.
On 30 May 2008 at 5:38 pm Aileen Cutting Gardner said:
Its about time the Govt got its bum into gear and supported us people who has lost money (hard earned I might add) and spend the money
in a better direction instead a wasting our taxes.
You will not look after me in my old age , so do something postive
about all these financial cos that have taken down the poor old kiwi.
Signed Aileen Cutting Gardner
On 6 June 2008 at 5:33 pm Mike Cole said:
Regulation seems to now be a foregone conclusion here in NZ as it is in the rest of the world [is it simply a passing fashion or an extension of the nanny state or a wise and sensible move!] - sadly it will not mean the end to comments like Aileen's as regulation in itself does not stop the problems caused by mis-selling and/or company collapses.
What regulation does do is:
* tar everyone with the same brush and ultimately as a professional body we as Advisers either collectively or within the groups we opt to join should push the "rotten eggs" out of the basket
* it creates a whole new industry called Compliance - this was the biggest, fastest growing sector in Financial Services in the UK at least until last year and perhaps that is where all these extra costs come into play
* it simply means providers and advisers will start writing backside covering letters of great length and complexity so that the consumer, who will believe they are getting protection from regulation, will find that is not the case at all - if you don't believe me look off-shore for examples.
Where should we be going. Well let's get the balance right between attracting and retaining high quality people with great integrity and who put the customer first and foremost, who comply to the regulatory framework and who take the same level of care with other's money as they do with their own!
Secondly let's make sure that Advisers who do transgress willfully and deliberately are drummed out of the industry.....and finally let's educate the public on financial matters and get them asking the right questions BUT let us also make the client aware that they too must take some responsibility for their actions and that they should not allow the concept of a regulatory framework blind them to employing their excellent commonsense and gut instincts - remember if it looks and smells too good, it probably is just that - too good to be true!
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