FMA: Advisers can help clients avoid scams

Advisers have a key role to play in helping clients avoid scams, the Financial Markets Authority says.

Friday, October 6th 2017, 5:59AM 2 Comments

by Susan Edmunds

The FMA is participating in World Investor Week, an initiative run by IOSCO to promote investor education and protection.

FMA director of investor capability Paul Gregory said the FMA wanted people to think before they took up investment options, particularly from off-shore providers.

“The more that is reinforced, the better, by us and advisers.”

He said clients valued the rapport they had with their investment advisers and had a good relationship built on trust. That meant advisers were well-positioned to tell their clients not to take up opportunities that sounded too good to be true.

“They can say ‘for God’s sake don’t do that, think about it, call me if you think responding to that advertisement is a good idea’.”

He said no one was immune to being picked on by scammers. Just because advisers’ clients might be more sophisticated investors, it did not mean they were safe.

Research by the Financial Conduct Authority in the UK found that older, wealthier, risk-taking men were the most likely targets for “share fraud” when worthless or unsellable company shares were on offer.

Women were more affected by “recovery fraud”, when scammers offered to recover funds or a lost investment in exchange for a fee. Other scams, such as Ponzi schemes, were more likely to sting younger investors.

The FMA has been focusing its efforts on highlighting the benefits to investors of using providers that are licensed in New Zealand.

Gregory said the number of complaints received about scams was steady at about 1000 a year. These complaints centred on products such as binary options and foreign exchange trading. Where an unlicensed, unregulated company based off-shore withheld money from an investor, it was hard for the FMA to help.

Tags: financial advisers FMA investment ponzi

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Comments from our readers

On 6 October 2017 at 8:25 am Brent Sheather said:
I am very cynical of this sort of thing from the FMA. They are focussed on scams that impact .001% of the investor population yet are totally oblivious to the scams perpetrated on the other 99.99%. Where is the FMA in respect of closet indexing, high fees that materially impact investors retirement outcomes, the regular fake news emissions from the big players, non-disclosure of trading costs etc etc? Just smiling and looking smug doesn’t really do it for me or investors generally.
On 6 October 2017 at 2:29 pm R1 said:
Spot on Brent. Completely laughable when the FMA focuses such trivial issue and turns a blind eye or fails to act against the large scale rip-off of investors funds by the financial services; e.g. KiwiSaver funds grow by x% and the level of fees collected by the fund managers grows ahead of this; scandalous. What does the FMA do? Say its losing patience with fund managers not engaging with investors to switch out of default funds.

I think this image pretty much sums it all up:

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