Advisers should be whistle-blowers

Advisers are blowing the whistle on each other – and industry commentators say that’s to be encouraged.

Thursday, July 27th 2017, 6:00AM 4 Comments

by Susan Edmunds

When Financial Services Complaints Ltd released its most recent annual report this week, chief executive Susan Taylor said some of the increasing number of complaints about financial advisers were prompted by the influence of other advisers.

Some had met new clients and pointed out poor advice they received previously.

Fred Dodds, chief executive of the Institute of Financial Advisers, said that was to be encouraged.

He said the first code standard of the code of conduct for AFAs noted that advisers could report breaches of the Financial Advisers Act that they believed had occurred.

“I am aware of several instances where advisers have reported what they consider breaches but FMA have not followed up – in many cases because a lot have been category two by RFAs and are outside the code – but the FAA talks to 'care, diligence and skill'."

Compliance specialist Gavin Austin agreed advisers should be whistle-blowers where appropriate.

“While it’s not in the average Kiwi’s nature to dob people in, the regulator relies to some extent on advisers to be the self-regulator by reporting advisers who are doing damage to the profession by their actions. 

"Every competent adviser has a vested interest in assisting the FMA to identify those that should not remain in the profession.  It’s their profession and I feel they should help clean it up. A win for the public, a win for the FMA and a win for the professional advisers who do the right thing."

Adviser Brent Sheather said it should go beyond complaints about other advisers.

“When advisers see bad behaviour either from other advisers or, frequently, fund managers they should bring it to the attention of the FMA.  The way that we will get more people engaged with our profession and move some of that money from bank deposits into productive investments is if the public have faith in advisers and this means coming down hard on any people who talk rubbish and thereby bring the industry into disrepute.

"I recently emailed the FMA about one fund manager who used an example of Kiwisaver balances growing at 8% pa post-tax, post-fees.  This sort of nonsense happens too often locally and my view is the FMA should publicly name and shame the perpetrators.”

The Financial Markets Authority said it had received complaints about advisers, from advisers.

“The FMA does receive complaints about financial advisers including complaints from other advisers, although that is not common. It is also important to note that complaints can be made to the FMA anonymously,” a spokesman said.

“The FMA notes the statistics published this week by Financial Services Complaints Limited and encourages clients or customers to contact DRS services where they are unsatisfied with the response from their provider.”

Tags: AFA compliance financial advisers Financial Advisers Act FMA Fred Dodds FSCL IFA regulation RFA

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Comments from our readers

On 27 July 2017 at 4:14 pm w k said:
what if all advisers are to be individually registered annually or once in two years plus references from two practicing advisers (at least one of which can't be from the same organisation)? just my thoughts.
On 27 July 2017 at 5:00 pm Brent Sheather said:
With due respect w k I think that is known as “the blind leading the blind” or “putting the foxes in charge of the hen house”. If we want our industry to be credible self-regulation is a silly idea especially given the bad behaviour of the past and an inability to acknowledge what best practice looks like.
On 27 July 2017 at 6:13 pm w k said:
noted. am not aware that there are so many cowboys in the industry .... sigh. okie i will refrain from giving comments from now.
On 28 July 2017 at 9:12 am Dirty Harry said:
The solution is simple.
Put Brent in charge.

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