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[Weekly Wrap] Let's not follow Australia

New Zealand advisers should be watching what is happening across the Tasman with more than just a curious interest.  

Monday, December 8th 2014, 7:29AM 4 Comments

by Philip Macalister

There seems to be this idea that there should be Trans-Tasman harmonisation of regulations around financial markets including advice.

However, it is pretty clear that the Australian's haven't mastered this area. There is a recognition that their model hasn't worked, hence the FoFA (Future of Financial Advice) review that the politicians couldn't agree on.

Yesterday the David Murray-led Financial Systems Inquiry (FSI) released its final report. Out of the 44 formal recommendations these two will interest advisers in New Zealand. 

Align the interests of financial firms and consumers
Better align the interests of financial firms with those of consumers by raising industry standards, enhancing the power to ban individuals from management and ensuring remuneration structures in life insurance and stockbroking do not affect the quality of financial advice.

Raise the competency of advisers
Raise the competency of financial advice providers and introduce an enhanced register of advisers.

And if you want more evidence the Australian way doesn't work you just have to read this story. I call it a "holy crap moment" for advisers. 

However I don't believe for a moment that New Zealand has the problems Australia has. What's more it seems advisers in New Zealand aren't interested in harmonisation. A good example is a straw poll taken a the recent SiFA conference. None of the advisers there had any interest in doing business in Australia.

While we seem to have this idea that following Australia is sensible, it is worth noting that in some areas, particularly superannuation, Australia is looking across the ditch and what we do, especially with KiwiSaver.

Another story which caught my attention last week came from listening to Pathfinder's John Berry at the SiFA conference. There he gave an excellent presentation on performance fees. You can read more about it here.

This morning NZX announced that it had bought the SuperLife business run by Michael Chamberlain. This will be of much interest to advisers out there who use passive funds. For more on this story click here

 

« Bond investing and financial advisers[Weekly Wrap] Is there any truth to market manipulation rumours? »

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Comments from our readers

On 8 December 2014 at 10:54 am macca said:
An interesting article Philip in regards to Australian adviser competency issues. it was interesting to note in the comments section that accountants the banks were perceived to to be the primary offenders for providing poor advice or product flogging.
On 8 December 2014 at 11:00 am TheEditor said:
@macca Yes and it is interesting here that Rob Everett has talked about what the banks are doing and made some reference to including accountants in the FAA.
On 8 December 2014 at 11:42 am Mike Naylor said:
Macca. Nothing in the conventional training of accountants (or lawyers) enables them to offer financial advice. This is why the NZ regulation was careful to specifically exclude lawyers,and to restrict accountants to items incidental to other advice. Accountants who were interested have registered as AFAs and met those rules. This is one area were we did things better than Australia.
Where we went wrong was the carve-out for banks. The FMA has taken notice that banks are a problem.
The FSI report does put NZ advisers on notice that the days of AFA competency set at level 5 and high upfront commissions are numbered.
On 9 December 2014 at 10:14 am Pragmatic said:
The Australian Financial Services industry is at a very different stage of the maturity compared to the relatively embryonic NZ industry. Following the GFC (and industry claims about diversity, and elaborate products/solutions being tested), the world’s most competitive financial services industry came under intense political/regulatory/media scrutiny. With the public discovery of pricing, fees, vertical integration – all at a time when many had negative portfolio performance – came the start of Self-Managed Superfunds (or to put this another way – the beginning of disintermediation). In more recent years, SMSFs have delivered a reasonable outcome (helped of course by surging property markets, and a steady rise in blue chips), making it even more difficult for the Australian financial services industry. Of yes – and let’s not forget the Regulator (ASIC) who now have the Future of Financial Advice (FOFA) to contend with. To put all of this into perspective, the New Zealand industry is really needing to get properly established – from a regulatory, manufacturing, distribution and consumer perspective – before it comes close to where the Australian industry is at.

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