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[Weekly Wrap] This week has been about clauses not Santa Claus

One of the great, enduring, arguments over the years has been around things like "grandfather" clauses and now a "sunset" clause for some Authorised Financial Advisers expires. At the heart of the debate is whether people should get an easy route to a particular destination. Well this week the argument came up again in our on-going series of investigations into David Ross.

Friday, December 14th 2012, 8:00AM

by Niko Kloeten

A number of advisers have gained authorisation after being exempted from parts of the qualification requirements and it is unclear what will happen to these advisers when the sunset finishes at the end of next year. 

The issue has been highlighted by the case of David Ross, who was exempt from Standard Set C due to being a chartered accountant.  Chartered accountants certainly didn't get their qualifications from a packet of cornflakes but some have questioned whether they are relevant Standard Set C (the Code Committee obviously thought so).  Making these and other exempted adviser sit the standards would be the only way to really find out if they were up to scratch.

Another Ross-related story was about how investors who were recommended the firm by lawyers and accountants as opposed to financial advisers may find it difficult to prove a case against them.  

One of the risks of regulating financial advisers is that by raising costs and restricting access to advice it can leave a void that is filled by people who aren't trained in the discipline, not just other professionals as described in the story but uncles, brothers-in-law etc.  Good luck suing Uncle Joe for recommending a dud investment!  I also wonder how Ross Asset Management was presented by those who recommended it to their clients: as a fund manager or as a financial adviser offering a discretionary investment management service?  

Does New Zealand need more prescriptive regulation of advisers? 

One prominent adviser thinks so

Principles-based regulation such as the Financial Advisers Act is somewhat of a double-edged sword.  While it's preferable that the government doesn't tell private businesses how to operate, focusing on general principles rather than specifics can lead to vagueness and uncertainty in the minds of those facing stepped-up compliance without quite knowing exactly where the boundaries lie. 

There would obviously be a lot of debate if the FMA came out and told advisers how to go about certain aspects of their businesses at least they would know what they had to do (and would have no excuse if they didn't do it).  And if the prescribed methods turned out to be less than adequate it would be the regulator in the firing line rather than the advisers who dutifully followed its rules.    

And in case anyone needed to be reminded of how important it is to keep the bad eggs out of the industry, former financial adviser Evan Cherry was this week sentenced to a hefty jail term for defrauding his clients

One thing we'll never know is whether Cherry would have been able to become authorised had his offending not been discovered. 

Could he have passed Standard Set C?  I'm sure he would have been able to get a good character reference from someone.

This case, along with that of recently-convicted ponzi scheme operator Jacqui Bradley (and possibly David Ross), show the risks of the "personality cult" in finance.  With financial advice it may be that the more boring the adviser, the less likely he or she is to be a conman.  A comment I often hear from advisers is that if they were investment geniuses they would be on their superyacht in Bermuda, not designing a bond portfolio for a farmer in Whangarei. 

There was another court-related story this week but this time it was between two advisers who blame each other for the dispute that has ended up in the High Court.  There are two feuds intertwined here: the one between Tucker and Longman and the one between Tucker and AMP, which can be traced back a couple of years and involved issues more personal than what eventually triggered his departure from the company.  This dispute has been seen by Tucker (and some Good Returns readers) as an example of the risks of hitching your wago to one provider as a tied adviser.

Finally, in other news this week, NZ Home Loans has hit the $1 billion mark, Avanti Finance has been fined for not having enough directors and KiwiSaver architect Sir Michael Cullen has called for big changes to the scheme to bring down future NZ Super costs.

Niko Kloeten can be contacted at niko@goodreturns.co.nz

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Lender Flt 1yr 2yr 3yr
AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.24 6.79 6.65
ANZ 8.64 7.84 7.39 7.25
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 7.24 6.79 6.65
ASB Bank 8.64 7.24 6.79 6.65
ASB Better Homes Top Up - - - 1.00
Avanti Finance 9.15 - - -
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BNZ - Classic - 7.24 6.79 6.65
BNZ - Green Home Loan top-ups - - - 1.00
BNZ - Mortgage One 8.69 - - -
BNZ - Rapid Repay 8.69 - - -
BNZ - Std, FlyBuys 8.69 7.84 7.39 7.25
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CFML Loans 9.45 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 7.04 - -
Co-operative Bank - Owner Occ 8.40 7.24 6.79 6.65
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 7.74 7.29 7.15
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
First Credit Union Standard 8.50 7.99 7.85 -
Heartland Bank - Online 7.99 6.69 6.45 6.19
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.60 7.40 -
HSBC Premier 8.59 - - -
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 7.85 7.05 6.75 6.59
Lender Flt 1yr 2yr 3yr
Kainga Ora 8.64 7.79 7.39 7.25
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 8.25 7.79 7.55
Kiwibank - Offset 8.50 - - -
Kiwibank Special - 7.25 6.79 6.65
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Resimac - LVR < 80% 8.84 ▼8.09 ▼7.59 ▼7.29
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Resimac - LVR < 90% 9.84 ▼9.09 ▼8.59 ▼8.29
Resimac - Specialist Clear (Alt Doc) - - 8.99 -
Resimac - Specialist Clear (Full Doc) - - 9.49 -
SBS Bank 8.74 7.84 7.45 7.25
SBS Bank Special - 7.24 6.85 6.65
SBS Construction lending for FHB - - - -
SBS FirstHome Combo 6.19 6.74 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
Select Home Loans 9.24 - - -
TSB Bank 9.44 8.04 7.55 7.45
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TSB Special 8.64 7.24 6.75 6.65
Unity 8.64 6.99 6.79 -
Unity First Home Buyer special - - 6.45 -
Wairarapa Building Society 8.60 6.95 6.85 -
Westpac 8.64 7.89 7.49 7.25
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - 7.29 6.89 6.65
Median 8.64 7.29 7.32 6.65

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