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Advisers told to dob in peers

Advisers must dob in any of their peers who aren’t meeting industry standards, Financial Markets Authority chief executive Sean Hughes says.

Friday, May 17th 2013, 6:00AM 16 Comments

by Susan Edmunds

He addressed the first day of the Professional Advisers Association conference in Auckland yesterday and told them that the FMA welcomed direction from the industry on where it should focus its monitoring and surveillance efforts.

There were reports of instances where market participants had seen but not acted on other participants’ behaviour, he said. “We can do our job better when you work with us…Tips and complaints are an important source of information for the FMA and we encourage market participants to advise FMS of any poor conduct or behaviour.”

He said market participants should have processes in place to encourage internal whistleblowing if an employee suspected inappropriate conduct within an organisation.

Hughes told conference delegates that tip-offs would be kept confidential.  The FMA was alert to pressures on advisers such as reductions in income because of a drop in funds under management due to the economic downturn, he said.

The FMA wanted to take a “top of the cliff” approach to raising standards. “We are seeking to foster a culture in which market participants proactively work to set appropriate standards, put in place a robust approach to managing and monitoring compliance and willingly share information with us, including reporting breaches.”

But the FMA would only do its job well if there was advice from the market on what it needed to be looking at. “We ask you to play your part by bringing your concerns or issues to us.”

He said the FMA would direct its resources towards identifying, prioritising and solving important problems. “We all need to be alive to practices that may be causing harm, including poor insurance product replacement policies.”

« AFA requirements should be stricter: HughesRegulation 'not successful' »

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Comments from our readers

On 17 May 2013 at 8:47 am Barry Read said:
I say pick up the phone first and call the adviser!

I agree that if adviser behavior is breaching laws and regulations (and you have evidence of this) then reporting that to the authorities could be the right thing to do. We have seen a dozen or more cases where advisers have dobbed in others or had clients lay complaints direct with the DRS or FMA where the behavior they were reporting they 'assumed' was in breach. Most cases have turned out to be more a difference of opinion. My advice in cases like this would be to pick up the phone and talk to the other adviser first to try and resolve the difference of opinion before dobbing in or getting the client to take action. 90% of the time this would resolve the issues. I think dobbing in and having clients lay complaints directly with the disputes schemes or the FMA before approaching the adviser business just brings our industry into disrepute and in some cases the advice to do so is misleading the clients. Those words sound familiar I'm sure I have read them somewhere else.
On 17 May 2013 at 9:23 am traveller said:
Mr Hughes comments may not cut the mustard with some advisers who have a misguided sense of loyalty to fellow advisers, however badly that person is conducting themselves. For me, Yes, I would dob in someone whose actions I thought likely to bring the whole advisory business into disrepute. Isn't that what advisers should do? Protect their patch. Of course malicious unfounded complaints should be punished.
On 17 May 2013 at 9:43 am R1 said:
Geee, that's cheaper than doing proper audits against clear standards of all service providers. Should also help foster a 'guilty until proven innocent' approach and ruin good people's reputations; stupid. Let's get serious about doing the right thing and build systems that ensure all providers know what to do and are doing it.
On 17 May 2013 at 11:35 am Dirty Harry said:
One complaint lodged about one adviser probably wont trigger any alarms or raise any flags. So that acts as a pretty good filter. Remember when the real estate agents were all complaining about each other? That has settled down now, and may not even happen to the same degree with us. At any conference or training event most advisers are keen to work with, and assist/contribute to the greater good. If there are a bunch of complaints about a specific individual then the FMA will, and should, investigate. That's still a ways from "guilty until proven innocent". More like, the more smoke, the more likely there is fire. I have seen exactly this happen - I was one of many who reported someone, and the FMA acted. The individual concerned had to clean up their act, and knows that not only is the FMA watching, plenty of advisers around town are watching too. So if they turn up, and don't find anything, not only would it be a surprise, but eggies on faces for the many who tattled.

Hughes has seen that this system is effective, and I congratulate him on promoting it.
On 17 May 2013 at 11:43 am Bert said:
But will advisers dob in the issuers who pay them large commissions? Or will they eventually be labelled later as accessories to the misconduct as they knew and did nothing?
On 17 May 2013 at 1:27 pm John Honest said:
I pay my income tax.
I pay my annual registration, which is mostly a FMA levy.
Now I'm expected to run as a volunteer foot soldier for the underfunded FMA by dobbing in my peers.
Gimme a break!
It would need to be a scandalous breach of Regs. for me to ever participate in the FMAs distasteful forum for the disaffected and spiteful.
On 17 May 2013 at 3:11 pm RWAW said:
I understand Sean Hughes wanting Advisers to self police and protect their own industry and it makes good sense. What doesn't make any sense to me is that the Product Providers don't seem to have the same feelings towards the matter. There are plenty of Advisers out there that have had Agencies cancelled by more than 1 Insurer for underhand dealings and who are still writing business for another company. Why would the reporting of a cancelled Agency to the FMA not be a mandatory requirement for the Insurer? Furthermore when serious breaches lead to an Agency cancellation why would another Insurer pick these people up and let them write business?
I'm sure most of us know the answer to that one!
On 17 May 2013 at 3:35 pm Barry Read said:
Dirty Harry - I have seen three one off complaints to the FMA turn into full blown investigations with no further action taken. These were months long and very disconcerting to each adviser businesses involved. Also unless those businesses were able to prove innocence they were all potentially in the gun.
On 17 May 2013 at 4:57 pm Amused said:
Excellent point you make RWAW. A good case in point would be when Kapiti mortgage broker Kerry Buddle was able to hold an agency agreement with OnePath (they sent her to Hawaii one year) and yet at the very same time the ANZ Bank who owns OnePath refused to accept any mortgage applications from her along with the rest of the other banks. Yes……

Product providers do indeed need to be part of the solution to combating the bad apples in the industry. Unfortunately profit seems to be their first priority sometimes.
On 17 May 2013 at 5:29 pm Informed said:
I would suggest everybody focus on looking after clients and building their businesses. One should be far too busy to worry about the activities of others, unless an extreme case occurred.
On 20 May 2013 at 4:09 pm AFA Muggins said:
This is an interesting debate, and timely. I attended the PAA Conference, and heard Sean Hughes.

I’m also in a situation right now (having returned from the conference) where having given comprehensive planning advice to a client, I’m seeing an RFA under a QFE structure, effectively giving the same client, legal advice regarding structures and share ownership, and risk advice recommending replacement of the QFE income protection product, with a newer ‘better’ product they offer. The RFA has neglected to point out the disadvantages and risks of replacing, particularly that the mutual client has developed some significant health issues. Goodness knows why the adviser has not referred the client to a lawyer also regarding structures and ownership.

The employer of the RFA represents the interests of a profession, which the client works in.

So, I agree with Barry that it is probably best to ring the adviser concerned, however he and his employer work with many hundreds of clients throughout the country, and this is certainly not the first time I have seen similar advice from the same person. That adviser would probably thank me and that would be the end of it – after all he is employed, and is an RFA.

An interesting situation. One client, but potentially representative of many others.

Thoughts Barry?
On 21 May 2013 at 6:58 am Barry Read said:

This is one of those situations where putting the clients first is difficult due to the awkward situation. If discussing with the adviser and the client results in the correct outcome for this client, that should be the priority. Issues around QFE advice could be raised with the QFE directly. Though if he is an RFA then he is personally responsible. Happy to discuss offline the details.
On 21 May 2013 at 9:28 am Steve Wright said:
I'd recommend great caution before dobbing anyone in. If you are an RFA remember that you do not get the same level of immunity from civil action as AFAs do under Section 45A of the FAA and if you are an AFA, remember the protection afforded by S45A only applies if you are acting in good faith.
On 21 May 2013 at 11:42 am AFA Muggins said:

You appear to be suggesting that not only should I, as an AFA, give advice to my client, but also coach an RFA who is not acting in an appropriate manner, is giving advice they shouldn’t be and negotiate between that adviser and the client to give the best outcomes for the client.

I put the interests of the client first, always. I do that in my advice and interactions with the client. I work of a fee basis unrelated to time and effort. I’m not prepared to waste time putting the RFA right who is by all appearances an experienced adviser under a QFE structure, who is not working in the manner they should be.

How much of my time should be spent being coach and policeman to what is effectively incompetence.
On 24 May 2013 at 9:21 am AFA Muggins said:
...... and one of my clients is now getting insurance advice from an accountant, specifically to reduce or do away with personal insurances. The accountant is not RFA nor AFA.
It's an interesting world.
On 23 July 2013 at 3:28 pm Hoops said:
I agree with Barry R --- here are some thoughts for all with stones as the theme --- If you live in a glass house --- he who throws the first

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