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Advisers wrongly get blame

Financial advisers are getting the blame for product failures and the mistakes of people who are not authorised to provide financial advice, Australia’s Association of Financial Advisers says.

Monday, January 26th 2015, 6:00AM

by Susan Edmunds

It has made a submission to the Senate Economics Legislation Committee inquiry into the Scrutiny of Financial Advice, saying that significant consumer losses involving product failure are frequently incorrectly attributed to financial advisers.

"It is important to note that product failure should not be confused with advice failure."

AFA chief operating officer Phil Anderson told Good Returns that there had been a noticeable increase recently in the number of lawyers seeking to take action against financial advisers in cases where a product failed.

Sometimes this was because the adviser was the last in the chain left standing – the product manufacturer had often failed too, leaving only the adviser for the client to pursue.

“Financial advisers are subject to the complaint procedures as set out in the Corporations Act and thus they become an obvious target,” he said.

Anderson said it was easier for manufacturers than advisers to tick the boxes saying they had made plain the risks of a product, because they could do it through the product disclosure statement.

He said: “The risks are greater for financial advisers as the key issue often comes down to whether the product was suitable for the client.  It is often much more difficult for the adviser to prove that the product was suitable for that specific client, particularly where it failed for one reason or another.”

Situations where adviser remuneration was higher than normal were often highlighted in product failures, Anderson said, but he said this was never the reason for the failure.

When advisers were aggressively seeking high returns and investing in higher-risk products, advisers should ensure that they fully understood the risk involved, Anderson said.

“Greater financial literacy will ensure better decision making by clients and a greater understanding of the potential for investments to not perform as was expected.  It is also the case that improved documentation of the interactions with clients and recording of their needs and objectives provides increased protection.”

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Lender Flt 1yr 2yr 3yr
AIA 4.55 3.55 3.89 3.99
AIA Special - 3.05 3.39 3.69
ANZ 4.44 3.29 3.45 3.85
ANZ Special - 2.79 2.95 3.35
ASB Bank 4.45 ▼3.35 ▼3.19 ▼3.85
ASB Bank Special - ▼2.85 ▼2.69 ▼3.35
Bluestone 4.44 4.44 4.29 4.34
BNZ - Classic - ▼2.79 ▼2.69 ▼2.99
BNZ - Mortgage One 5.15 - - -
BNZ - Rapid Repay 4.60 - - -
BNZ - Std, FlyBuys 4.55 ▼3.39 ▼3.29 ▼3.59
Lender Flt 1yr 2yr 3yr
BNZ - TotalMoney 4.55 - - -
China Construction Bank 5.50 4.70 4.80 4.95
China Construction Bank Special - 2.80 3.15 3.19
Credit Union Auckland 5.95 - - -
Credit Union Baywide 5.65 4.75 4.75 -
Credit Union North 6.45 - - -
Credit Union South 5.65 4.75 4.75 -
Finance Direct - - - -
First Credit Union 5.85 3.99 4.49 -
Heartland 3.95 2.89 2.97 3.39
Heartland Bank - Online - - - -
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Heretaunga Building Society 4.99 4.35 4.45 -
HSBC Premier 4.49 2.80 2.89 3.50
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC ▼4.40 ▼2.95 ▼2.95 ▲3.69
Kainga Ora 4.43 ▼3.29 ▼3.39 ▼3.85
Kiwibank 4.40 3.74 4.14 4.40
Kiwibank - Capped - - - -
Kiwibank - Offset 4.40 - - -
Kiwibank Special - ▼2.65 ▼2.79 ▼3.25
Liberty 5.69 - - -
Lender Flt 1yr 2yr 3yr
Napier Building Society - - - -
Nelson Building Society 4.95 3.75 3.99 -
Pepper Essential 5.18 - 4.98 4.98
Resimac 3.49 3.45 3.39 3.69
RESIMAC Special - - - -
SBS Bank 4.54 4.85 5.05 5.49
SBS Bank Special - 2.99 3.05 3.69
The Co-operative Bank - Owner Occ 4.40 ▼2.79 ▼2.95 ▼3.39
The Co-operative Bank - Standard 4.40 ▼3.29 ▼3.45 ▼3.89
TSB Bank 5.34 3.59 ▼3.59 4.19
TSB Special 4.54 2.79 ▼2.79 3.39
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Wairarapa Building Society 4.99 3.95 3.99 -
Westpac 4.59 4.15 4.09 4.49
Westpac - Offset 4.59 - - -
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Median 4.55 3.32 3.39 3.69

Last updated: 28 May 2020 10:38am

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