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Code Committee sackings unwarranted

Tuesday, November 17th 2009, 5:15PM 4 Comments

by Philip Macalister

With all the controversy of the advisory industry I thought it would be worth recording some thoughts on what is going on at the moment. There is a feeling that any control or input advisers had over their coming regulation has totally disappeared. Last week’s sacking of two advisers from the Code Committee affirms this notion strongly for me. Especially as there are no plans to replace them on the committee. Also former AIA New Zealand boss David Whyte made a lengthy comment on the article last week which had some salient points. One he made was any thoughts of co-regulation of the advisory industry are long gone. He also made some very interesting points about the Consumer survey of advisers and why it was flawed. There is a feeling the survey had a pre-determined outcome; if so it achieved them. IFA president Lyn McMorran said in an email to members yesterday it used “sensationalist” – that no one would really argue with. However I have also heard the language in the draft sent out for review and the final published work was vastly different. With regards to the sacking of Patrick Middleton and Liz Koh, I’d have to say that the Commissioner of Financial Advisers, Annabel Cotton, has over-reacted. One argument put to me is that if these two were forced to fall on their swords, then anyone associated with any of the firms which “failed” the Consumer survey should not hold high office. This argument would capture people like McMorran. Clearly that doesn’t make sense; just like the Code Committee sackings make little sense. I doubt many people had linked the Code Committee members with the survey and surely it would have been possible to defend them if the situation ever developed that far? Both are well-regarded members of the advisory community and no doubt provided valuable input into drafting the regulations.
« Whose interests are Consumer serving?Hanover's winners, losers and whingers »

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Comments from our readers

On 18 November 2009 at 8:01 am Concerned said:
I have watched with growing alarm the aggressive and attacking stance Consumer Magazine has taken under the guidance of Sue Chetwin.

I remember an article in the Sunday Star Times, where a KiwiSaver provider raised concerns about a judgement table Consumer had produced, whereby they linked insurance company S&P ratings to said providers funds as an indication of their strength. Despite the provider being absolutely correct in his comments (an insurance company rating cannot indicate the worth of a fund), Chetwin, rather than updating the table, critisised the individual and accused him of sour grapes.

When DomPost columnist Bruce McKay critisied the recent Consumer survey, Chetwin couldn't help but attack him personally in a public reply, implicitly questioning his credibility because he is a director of a finance company.

If you have any doubt to Consumer's attitude to the industry, check out their introduction to KiwiSaver schemes on their website: "They're managed funds, but still worth considering".

I, for one, have little respect for the research or results of the recent Consumer survey. However don't think that means the core message from the findings is not true - I am looking forward to new regulations and an industry lifting its game.
On 18 November 2009 at 8:02 am Independent Observer said:
Those who are familiar with my thoughts will understand that:

a. The outcomes of the Code Committee have largely been pre-determined, with any "consultation" with industry being a passive form of public relations
b. On the them of "public relations" - the recent actions of the Code Committee are a PR nightmare - it is good PR-common-sense to immediately replace outgoing Committee Members, especially where there are a large number of applicants for such sensitive positions
c. Finally - wake up and smell the roses (or have a chat to an average Kiwi mum & dad) - the sentiments of the Consumer Survey are right on the money, so please stop trying to suggest otherwise.
On 18 November 2009 at 10:55 am David Whyte said:
Sorry to keep on about this, but point c) in Independent Observer's response is nothing short of bizarre.
Rather than 'chat to an average Kiwi mum & dad' - which is even less credible evidence than the Consumer Magazine exercise - why not lobby for Adviser organisations and their supporters/providers to produce an accurate picture of the consumers' view of Advisers?
A professional research organisation would have rejected the approach adopted by the Consumer Magazine initiative, and sought to establish unbiased and statistically significant evidence before reaching any conclusions.
My point is that Independent Observer may be totally 100% correct, but to rely on such unsubstantiated evidence upon which to conclude the 'sentiments of the Consumer Survey are right on the money' is wholly subjective, is only an opinion expressed, (which is everyone's right) but that also has no basis in fact.

It's time someone took the lead an recognised that the regulatory environment which is about to be introduced will not be a cosy, cofortable, co-operative effort.

Remember which bodies co-ordinated the Consumer Magazine's exercise? These are the bodies (or at least two of them) which are charged with making regulation effective - not consensual, co-perative, or consultative - but effective. The Consumer Magazine 'joint initiative' is an indication of what lies ahead. Be prepared.
On 19 November 2009 at 12:12 pm Martyn Smythe said:
It seems strikingly obvious that the industry needs to call for the immediate reinstatement to the Code Committee of Koh and Middleton. There seems to be general acceptance now that the Consumer exercise was extremely shonky and drew broard and largely unsubstantiated conclusions. Consumer is in the business of selling magazines and the 'Tabloid' approach to this story will probably help them achieve that aim. The primary reason Koh and Middleton were forced to resign is because Annabel Cotton either over-reacted or hit the panic button. Either way the resignation action has been destabilising as it gives credibility to a poorly written Consumer story. If the Code Committee itself is to remain credible Koh and Middleton need to be reinstated.
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