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'Ross a hit to confidence in advisers'

New Zealand’s investing public had just started to regain trust in financial advisers when David Ross was uncovered as a fraudster, a panel discussion in Auckland was told last night.

Friday, October 17th 2014, 6:00AM

by Susan Edmunds

The FMA hosted a panel discussing New Zealanders’ understanding of investment risk.

Chief executive Rob Everett said investors should know they could never be completely sure they were not going to be ripped off, or lose money. “You should always spend time properly researching anything you put your money into.”

New Zealanders had a propensity to expect that someone would be there to bail them out if things went wrong, he said.

But he said things had changed a lot for the investing public over the past five or six years. Since the finance company collapses, New Zealand’s regulatory environment had been completely overhauled, the FMA had been set up and the Financial Markets Conduct Act was coming into force.

“That has a significant focus on conduct and the behavior of people offering financial products. It has a strong focus on behavior, a focus on misselling,” Everett said.

There had been a significant effort made to encourage the growth of the financial advice sector, and to raise standards among advisers and encourage people to use them, he said.

Financial adviser Martin Hawes agreed that investors could not be completely protected from criminal behavior. He said the investing public seemed to be gathering trust in advisers after the 2011 Financial Advisers Act. “Then David Ross was uncovered and public trust in the financial services industry took another hit,” Hawes said.

Everett said for most people, in most circumstances, it was not immediately obvious what they should do with their investments and financial advice was needed.

He said:  “If it’s a large sum of money, or an investment decision that’s critical to long-term financial planning, that’s when they should think about getting financial advice to talk through the options. It’s easier for someone who is not emotionally attached to help see different angles. Where decisions have a big impact, those are the decisions where you should be thinking about advice as an option.”

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