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[The Wrap] It's time for industry leaders to step up and support advisers

Advisers are, unfairly, bearing the brunt of the fallout from recent reports. It's time industry leaders stepped up and articulated to the public, regulators and politicians the value of good advice.

Friday, February 15th 2019, 2:09PM 12 Comments

by Philip Macalister

The fallout from the Royal Commission report in Australia continues and it's been fascinating to watch what's happening across the Tasman, particularly from groups representing advisers. 

In the home loan space the MFAA has been exceptional at rallying its troops, fronting media and campaigning against the recommendations presented by Hayne.

It's quite the opposite in New Zealand. In the wake of both the Royal Commission and the FMA/RBNZ report into conduct around life insurance, it's hard to find a voice standing up for advisers.

The one voice which made the most noise was, not unsurprisingly, the Financial Services Council. However, its message was more around fronting for the majority of its members - the life insurance companies.

There haven't been a lot of voices fronting for advisers - the ones who have been borne the brunt of the criticism. The have worn it not because of their actions, but largely because of the way the product providers have chosen to remunerate them.

This week I head some quite moving stories.  One was about life companies getting phone calls of "absolute despair" from advisers who have been feeling punished.

Yet they are out there doing their jobs. One had seen six terminally ill clients in the past month.

"This is what I do because my promise is lifelong," the adviser said.

The message to all advisers is simple. Don’t feel guilty as long as what you have done has the client at the centre of everything.

There is no reason to sit there and be ashamed of what you having been doing. 

As an group of advisers everyone needs to stand together, show a united front and we all need to make sure we are articulating the good work of advisers.

This is where industry bodies need to step and and be seen to be leaders, supporting the good work of their members.

It's happening in Australia and needs to start happening here.....sooner rather than later.

Tags: Opinion

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Comments from our readers

On 15 February 2019 at 8:16 am Brian W Brown said:
Thanks for that article Phillip, unsure why this has affected myself to the degree whereby i hardly want to venture outside the office but it has.And this from someone with 33 years experience who has never had a claim declined and no company i have dealt with has ever had a complaint from someone that i have dealings with that i am aware of.Perhaps the companies are happy that the flak has all been directed at us for some obscure reason ??
On 15 February 2019 at 1:05 pm perryb said:
Finally someone stands up for the adviser. Why does Philip have to remind the adviser groups to support and encourage them to stand up and say something. I havent seen anything on these platforms from the groups telling the public/FMA etc the work we do, the claims, the writebacks etc. I also had some claims over the summer, and these have been my focus, this is when the rubber meets the road, and when we are really appreciated. On another level a client has just changed their insurance to AA form my supplier, stating it is cheaper. Again, no replacement policy, no understanding what they now DO NOT have as benefits.(believe me there are many)

Same as the banks which I have been through before. I thought this is what the compliance issue was all about, obviously not, its business as usual for many of these suppliers, but the adviser has to comply, we are over paid, dont do a good job, who is actually behind the witch hunt.

Thank you Philip reminding the broker groups to stand up for us, NOW
On 15 February 2019 at 4:08 pm seandnz said:
Finally, advisers sticking up for themselves. I was an adviser for almost 20 years and left several years ago but am still passionate about what advisers do.

I think the adviser groups (you know who you are) should form some form of lobby/advocate group to fight the cause and get out there and use social media and other channels to educate the public what advisers do. A non branded approach to public education, because no one seems to be doing it.

I would really hate to see the industry implode where advisers have just had enough and leave the industry and what choice will the public have then? Banks, Banks or Banks...

This could be a master stroke by the banks to get rid of advisers so they don't have to pay commissions on over 50% of their new mortgage business.

C'mon advisers and adviser groups, forget about divide and conquer pool together, there is strength in numbers.
On 15 February 2019 at 4:17 pm Frustrated Adviser said:
Thanks Phillip
Have been wanting to add some comments re these issues for a while now.
The Insurance companies and the Industry bodies have been totally absent from the recent issues when they had the opportunity to explain, support and rubbish what has been going on in the media and political beat up with advisers.
Yes, I get paid commission ..... I work long hours, see clients in their home,pay staff, pay for an office and car etc., these appointments could result in no business and no payment.
I live on borrowed money for up to 2 years due to potential clawback, if someone dies I loose my renewal, if someone reduces, cancels, moves to another provider, bank or employer scheme I loose my renewal commission. If someone simply changes their mind or has it changed for them yep I loose my commission - all of these issues mean I could potentially end up with a negative income for that one client.

If another adviser comes and replaces business especially in the first 2 years I loose commission and therefore have not been compensated for all my work for that client.

I am working on, thinking about, worrying about my business, the industry the investment markets and my clients constantly.
Hours of University and Industry study. I give up my family time in the evenings and occasionally weekends to see clients or keep on top of paperwork.

I do not get compensated for the hours of work trying to keep up with the constant compliance and regulatory changes that have affected my business.

I have always kept the client top of mind since I started in the industry - would another adviser think or offer something different quite possibly, but if they are so certain what they are doing is right then they should do the right thing ring the adviser concerned and purchase the client from them or even better take less upfront etc.

Punish the Adviser that is not doing the right job instead of assuming we are all the same.

Insurance Companies CEO's have been absent, you have had the opportunity to support us but the utter silence has been deafening - a suspicious mind would have to think you have driven this whole issue in order to lower the commissions that you set in the first place.

By the way if I take zero commission it barely alters the premium - so what change is the client going to see in premiums - so far no change even though trips have been dropped.

They also had the opportunity to explain why you started the trips, what is the purpose behind them - it is certainly not so we can holiday with other advisers (sorry), the speakers, the networking with our peers to learn more,better etc cannot be understated (I haven't been on one free trip for at least 10 years but value all I learnt when I did attend) and yes we had a beer or two and shows etc but that was not the main gain and we did work!!!
Industry bodies - this is even worse as not only have you been silent when we pay you to come out and support us in the media etc, but you are not even telling us what is going on.
You are all attending on our behalf at our cost industry meetings, MBIE, FMA to name a few are apparently putting our point of view across - not sure how you do this when you have not asked what our viewpoint is.
More often than not other than telling us in newsletters that you have been to another good meeting you don't actually tell us what was discussed, what viewpoint you put across, what the next step is and we pay you a fee for this total lack of support.
Enough is Enough a slogan from UFAA - United Financial Advisers Association which already has 1,000 members in Australia - this group is a dedicated Government and Public Lobbying group run by Advisers - maybe just maybe we need them here.
We have to be loud and proud and promote what we do and why we think it is good it appears no one else is going to do it for us.
I seriously recommend that we should be understanding what our Industry bodies are doing for the fee we pay - sadly in most cases it is probably not much more than Insurance.

perryb sadly I think we have to stand up for ourselves and stop be reliant on these groups to do it for us as they can't,wont etc.

Frustrated Adviser (by the way love the job I do)
On 15 February 2019 at 7:13 pm Adviser1 said:
Well said Frustrated Adviser, I actually think our commissions should go up not down, I certainly don't feel overpaid.
On 15 February 2019 at 9:36 pm guscott said:
Excellent article Phillip and right on the mark. It is great to see someone who has a forum to do so, come out and say something. Sadly, not really your job but it has been very disappointing that no one else has had the proverbial to be prepared to speak on behalf of the advisers.
Many of the senior management of the insurers are working for successful companies because of the support and work carried out by the distribution networks yet their silence is deafening. I am so over hearing them say “we welcome the report and take on board the comments made etc…” or even worse fringe players pushing their own direct business or robo advice platforms and rubbishing commission.
As for the industry bodies, well I was always under the belief that the association which I have been a member of, and paid subs for 25 years was not only an advocate of good advice but also the voice for the adviser community. I stand to be corrected but I have heard nothing from them.
“Frustrated Adviser” you have summed it up very well in terms of the work we do. As an AFA and CFP I and my colleagues have worked hard and long hours for many years often without payment to look after clients and do the right thing. We fully disclose our commissions and have never ever been questioned by clients on our remuneration. We don’t take incentivised trips and spend countless hours and lots of dollars being compliant and making sure we give good advice. And then the real work, sitting in front of client who has a serious or terminal cancer diagnosis or managing the death claim for the spouse where many of these people are not just clients but friends who we have come to know over long periods of time. Or as many advisers would relate to often being a relationship counsellor over money matters or just a someone for clients to talk to and share issues with (knowing that they are not being charged by the minute).
If we sit back and do nothing, then ultimately it will be the consumer who will suffer. And as a consumer of certain products that we don’t work with whereby the broker/adviser get paid by commission – I much prefer that arrangement with me paying a premium knowing I can get advice whenever I speak with him or her rather than getting a bill.
On 18 February 2019 at 10:02 am TripleA said:
Philip certainly has a point to some degree.

There are however a group of adviser associations that meet regularly and then jointly lobby MBIE / FMA etc. This includes FANZ, SIFA, The Association, IBANZ and the TripleA. We all feed back to our respective memberships on this work.

A key point however is that we don't have an over arching communications function and of course one association cant speak publicly for the others.

That said we have developed a range of generic responses to the recent announcements included:
• It will be important that a sustainable business model (including remuneration) is developed for independent financial advisers to ensure New Zealanders can access quality financial advice.
• A better comparison of international models needs to be developed and circulated. That comparison needs to take into account jurisdictions where, for example, serviced offices are provided to advisers. The simplistic comparisons use to date by MBIE / FMA are not an apples-for-apples comparison.
• It is important that a pool of financial advisers stay independent and that the sole delivery model does not become tied agents and sales people.
• It’s the insurers that set the remuneration structures not advisers. Its solely up to the insurers and the FMA to ensure those structures don’t place inappropriate incentives. Most advisers ensure their client’s interests are foremost and if inappropriate incentives are removed then that will just reinforce the good work that advisers do currently.
• There is significant value for the consumer in obtaining genuinely independent financial advice.

We are also, as a group, seeking a meeting with the Minister to discuss these and other points.

Most of the Board members on these associations are advisers just like those that have commented above. Many put in a lot of voluntary hours in meetings and on submissions on behalf of advisers right across NZ.

We can certainly always do more and try and be more effective as advisers associations, but there is a lot of work done behind the scenes.
On 18 February 2019 at 2:45 pm Ron Flood said:
TripleA. Great to hear that meetings are taking place with MBIE/FMA etc but from what I have seen over the past 10 days, it is an utter waste of time.

Over the past 12-15 months there have been consultation papers for both FSLAB and the Code. The whole point of the FSLAB & the Code was to cover adviser conduct and client care.

This whole process has been undermined by the FMA and Reserve Bank, who admit that they have no legislative mandate, to meddle in this area.

The FSLAB and Code, together with new disclosure requirements (yet to be decided) was supposed to be the panacea going forward.

Obviously, this was not enough for the FMA and Reserve Bank, who obviously feel that they know best.
On 18 February 2019 at 4:38 pm Frustrated Adviser said:
Thanks Triple A,
Your comments support my feedback.
You are in regular meetings putting your members viewpoints forward - hmm not sure how any of you are doing this when the general feedback from a number of advisers belonging to different groups is "we have not been asked for our feedback/opinion).
Wonder about the "provide feedback" comment from what I have seen from my Industry body this is a few lines of no depth so I have no idea of what has been discussed and opinions put forward.
You state that a consumer does benefit from Advisors which is great - so did your organisation come out and put that viewpoint forward to the consumers - does not assist us advisors if you are not willing to support us openly. If you feel talking to the media is pointless then ads in the paper etc would be a start.
Lastly, great that all the Industry bodies are working behind the scenes but I am sure your members do not think/expect this to be in secret and do expect full transparency on an ongoing basis as to what our bodies are doing for us and the money we pay!!!
This silence and working behind closed doors has to stop - Industry bodies keep us better and more regularly informed and ask us our opinion and more importantly keep the consumer informed.

We all do voluntary hours for our clients that we do not get paid for - it is simply the industry we are in
On 19 February 2019 at 8:48 am John Wood said:
Let’s look at Australia for one moment. In the last 10 years they have had enquiry after enquiry into disreputable behaviour in their financial sector – 2009 Ripoll Inquiry, 2010 Cooper Review, 2014 Murray Inquiry, 2015 Trowbridge Report and to cap it off 2019 Justice Hayne’s report. All this has done is bashed the confidence out of the financial advisory sector on both sides of the Tasman and the banks and financial product manufactures seem to have come up smelling like roses. Figure that out! The power base has not changed one iota, the culture of arrogance, greed, profits and shareholder returns has not diminished.
Immediately following the FMA/RBNZ report and the Haynes release it was headline news as we know, and if you believed everything you heard, not pretty at that. CEO’s from banks, insurance companies and other self-appointed notaries were quick to front up to the media mixing stories of how sorry they were, noting things have and will change for the better. We have numerous adviser bodies in NZ representing a wide range of financial advisers. To the best of my knowledge not one stood up in the media to support the great work that by far and away most financial advisers do. They only had to point out a few of the very positive things reported in the FMA & RBNZ report on Life Insurer Conduct and Culture such as:
Page 13 of the report: “For products sold without advice we observed a lack of adequate systems and controls to prevent or limit sales to customers for whom the products may be unsuitable”
Page 14 of the report: “When a product is sold without advice, there is an increased risk of the customer making an unsuitable purchase, as the policy is often long and complex, and doesn’t aid understanding”
What an opportunity for one if not all our Associations to tell the public that our regulator believes financial advisers do add value. If only one Association had stood up for its members that would have been great to see. As for the Report noting a range of products that were sold with very poor outcomes – accidental death, funeral cover, credit insurance, these simply are not the products recommended by advisers, they come from product distributors with no advice. More evidence. This is not to say however that there are not many improvements that all of us need to take note of and improve moving forward.
I do acknowledge that many Associations have worked hard with the FMA, MBIE and Government over the past few years to help design a workable legislative framework and should be thanked for this work. Yet to be really effective I ask - Is there not one Financial Advisers Association that has the strength and desire to stand up in the public arena, tell the truth and truly represent its members? The PR machine of banks and insurance companies is both upfront and going on behind closed doors. We ignore that at our peril. Look over the ditch and ask what future mortgage brokers have and who is the winner out of that? Don’t kid yourself that such a situation could not develop here especially if the report back to the FMA by insurance companies in June does not go well. Change can be a threat or an opportunity. Our attitude and our plans will define whether we grow or stagnate.
On 20 February 2019 at 12:21 am Winka said:
You people still sticking with being in the profession are fortunate to have someone like Philip who has stuck beside the profession in his capacity. My point is made regarding the various government bodies that seem to be forever expanding, yet achieving nothing obvious??

Regulation existed heavily in the biggest economy in the world, the USA. That 'biggest' economy was home to the huge catalyst for what became known as the GFC, resulting in people outside of the USA rolling names off their lips such as Freddie Mac & Fanny Mae and Lehman if they have known them personally? Regulation existed in a form still utilised, called a prospectus. We then experienced a few Directors of finance companies being thrown in jail. A prospectus involves a division named a Trustee. A role of the Trustee is to ultimately oversee the actions of a director, so we need to wonder why no Trustees were ever hauled before the courts? It seems incredulous that Trustees never seem to have to face the music...we wonder?

Someone once stated that it is 'strange' that government departments are quite unique in regard to the fact that they are not performance-related in regard to their weekly payday. Then went on to say, their main action/priority for the week is to check their phones (banking) every Friday morning to make sure their pay went in, even if they actually achieved nothing for the week? Compliance and regulation surrounds us every day, in ever-increasing 'doses.' Eg; virtually every town has many new scaffold companies who erect scaffold around existing buildings, and then wrap those buildings in special plastic. This is the direct result of central government (passing on to local governments) applied compliance and regulation in the name of a wee leak or a possible earthquake (even though the buildings have survived dozens of earthquakes over often many decades). It must be obvious to others around the country that all of this is not actually resulting in a better building in most is resulting only in a thing called DEBT. No-one in any of those departments appear to want to have the finger pointed at them for a building with a leak, or gets a crack from a 'shake?'
I, alongside a small handful of colleagues who I have remained in contact with over many decades, began warning a number of people on my/our 'E' list of a pending negative financial paradigm shift, so this was all set in writing nearly 15 months ago, so no-one can say, "oh he/they just saw it on a recent media report and are laying claim to such wisdom?" Many agree that the current 'compliance' & 'regulation' "tsunami" in regard to the (NZ) financial industry has merely created more jobs for government dept's, who still do not appear to have to show any performance related to their payday, and put the "willies" up good people like Brian Brown....without any conscience from their side? Brian, (& others) keep up the good work and remain an excellent example to the new incoming breed as to the power of 'self-regulation', because those new-comers are going to have to take over the reigns in this new approaching era of immense and unnecessary DEBT.
A very serious matter.
On 20 February 2019 at 8:17 am JPHale said:
@John Wood, here here! Great comments! On the money and more fodder for the pollys to digest.

I do feel the art of reading is being lost, ironically in the digital age, as people are taking headlines and not digging into the details.

We need more of this, as we have a talented and diverse industry with many experiences and views.

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