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Govt should get pinged over its MRP sales process

If the government is serious about honouring the objectives around its reforms to the financial advisory sector then it needs to start walking the talk.

Friday, April 12th 2013, 8:22AM 5 Comments

by Philip Macalister

Almost daily I hear concerns within the industry around how banks are selling KiwiSaver to their customers.

Technically only AFAs can advise on KiwiSaver but banks continue to use non-AFA staff to get their customers to switch their KiwiSaver to their bank run scheme.

Advisers and managers constantly tell me about how they are losing clients. Last time I wrote about this the FMA complained about the posting and essentially said there is no problem.

The latest concerns are around the Mighty River Power sell-off. Putting the politics of the sale aside the whole process around what advice potential investors receive is a massive concern.

The government’s approach to making sure New Zealanders buy $2000 worth of shares is reckless and irresponsible from a personal finance point of view.

Most of the people who have pre-registered probably own no direct shares. Yet share investing is a complex business and the reality is to have a half decent portfolio investors should have a minimum of $50,000 or even $100,000 invested over at least half a dozen stocks.

To own just $2000 worth of shares in one company isn’t prudent.

Indeed if it was an Authorised Financial Adviser who did this I have no doubt the Financial Markets Authority would say that AFA beached the Code.

The government should be running a major publicity campain in conjunction with the MRP sell-off promoting AFAs and educating the public about AFAs and category one investment products.

I believe as part of the reforms a promise was made to do a public education campaign. It’s about time this started.

The government should ensure potential MRP investors have access to advice from AFAs. It is prepared to leave some money on the table for investors and it is prepared to “incentivise” the offer with the promise of bonus shares in the future. If it is prepared to spend money like that then it should subsidise some professional advice to investors.

The way the current sell off is going the Government is acting more like Harvey Norman and its Buy a New TV ads and others who run loud ads in the papers encouraging consumers to spend their money. Or maybe it’s more like those Buy a set of steak knives TV  ads.

Whatever it is doing a disservice to New Zealanders and undermining the objectives of the financial adviser reforms.

« [Weekly Wrap] MRP process leaves a lot to be desiredIFA working on pro-bono offering »

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Comments from our readers

On 12 April 2013 at 8:51 am Independent Observer said:
Agree with your sentiments Phil.

IFA: what are your views on the topic? Have you approached the FMA / lobbied the government to express these?
On 12 April 2013 at 10:23 am Dirty Harry said:
So who are the cowboys now?
On 12 April 2013 at 11:16 am broker said:
Finally a real story...I think this is huge issue but everyone seems to be rather quiet on this until now...well done Phil..
On 12 April 2013 at 2:54 pm Non Investor said:
Phil
Another thought is that the Government's early full page ads said that they were considering making an offer of shares. This was untrue. They were clearly moving down a defined path. There was no "considering" involved. The FMA should ping them for false advertising.
On 12 April 2013 at 4:30 pm Jimbo said:
FMA - missing in action as usual.Lol

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