|        About Good Returns  |  Advertise  |  Contact Us  |  Terms & Conditions  |  RSS Feeds

NZ's Financial Adviser News Centre

GR Logo
Register free for JLL Future Cities Wellington here Dismiss
Last Article Uploaded: Monday, April 12th, 7:04AM


Latest Headlines

Adviser appears before FADC on record keeping charges

A financial adviser with 35 years' experience appeared before the Financial Advisers Disciplinary Committee in Wellington last week, facing allegations she didn’t understand her profession’s legislation and code.

Sunday, December 13th 2020, 4:29PM 6 Comments

In 2019, the Financial Markets Authority audited services provided in 2017 and 2018 by the adviser, whose details, along with her clients, are suppressed.

Counsel for the FMA, Simon Chapman, alleged the adviser did not comprehend she was providing personalised advice in relation to four clients, therefore had not kept proper records.

Barrister Lisa Hansen, for the adviser, explained that three clients didn't meet the threshold for personalised service therefore had been provided a different level of advice.

In the case of the fourth, the FMA had failed to uplift the correct papers demonstrating the client’s status, Hansen said.

The adviser responded to most of Chapman’s questions by stating, and re-stating that no client would receive any personalised service from her office until they had completed a full financial questionnaire and committed to a comprehensive financial plan. Any cursory advice passed before that commitment, she considered, fell under her definition of “limited advice”, a term she considered more customer-friendly than “class advice”, which is used in legislation.

Frustration with the 3,000 page file and months of preparation was evident on the part of Disciplinary Committee Chair, former Judge, Sir Bruce Robertson.

He opened by suggesting to the prosecution, “I would have thought we would have distilled your case by now.”

Chapman began by stating this was a case about records. However, much of the day was spent discussing definitions of “personalised service”, “client”, “class advice”, “limited advice”, and “no advice”.

Robertson questioned the relevance of the example of a couple who were clients of the adviser’s Residential Property Service, and had opted to leave a home loan account open although it had been paid off.

“What’s the financial service in advising to leave a mortgage document open, what is financial at all about that activity? Is there no common sense rationality in the operation of the code?”

Another client whose file was discussed was a retirement-aged man who enjoyed risk and liked to maximise his gains. The adviser was challenged to call him a client but she told the hearing she could not, as he had never completed the required questionnaire, and simply visited her downtown office for casual advice.

“I have been talking to this gentleman for a number of years about his need for personalised service, but people want high returns,” she said.

She provided “limited advice”, and documented it as such, when sharing information on replacement investments following the forced sale of a shareholding. Had she provided personalised service to the client, the adviser believed she could have helped with wise placement of about $700,000. As it was, he simply sought advice on the investment of $150,000, into three opportunities he learned about through her office.

In her formal interview with the FMA, the adviser had agreed that discussions around this client’s Rio Tinto shares were “personalised”, because she happened to know a singular circumstance relating to the man’s life. She regretted the admission, she told the hearing, as well as the inability to withdraw it.

Another client was beamed into the hearing from Colorado, to answer whether she and her husband believed they had received personalised service from the adviser despite not having completed the questionnaire. Chapman pointed out that the adviser had noted that a long-held insurance policy ought to be retained.

While the adviser acknowledged awareness of some of the circumstances of the blended family and their “wider and older” health status, she refuted noting a “gold standard” insurance policy would be retained constituted personalised service.

Chapman questioned the records kept by the adviser in relation to the fourth client, especially improvement to the client’s NZ Funds investment profile.

Four times the adviser had downloaded detailed tables to assist the client with decision making.

“Can I just clarify the squiggly lines [in the notes]?” the adviser was asked. “That’s my demonstrating volatility to the client, that’s explaining the risk.”

With the assistance of counsel, the adviser conceded she may hold an idiosyncratic view of the term client. She further explained that in her practice, a “prospect” became a client once they had completed a financial questionnaire and agreed to a financial plan. This view was formed through her background in the insurance industry. Until that point, all advice given is qualified, limited or, she agreed, “class” advice as defined by the Act.

“I don’t accept that having a different view means that I don’t understand the legislation.”

Chapman read from section 15 of the Act that service becomes personalised when the adviser takes into account the personal financial situation or goals of the client, but the adviser reiterated her threshold for personalised service was related to completion of relevant questionnaires.

The fact that she was aware of occasional circumstances or ambitions of casual clients did not, in her view, constitute personalised service. 

“The separation of goals from money is untenable, that’s a life coach, working towards people’s goals.”

The committee reserved its decision.

Tags: Code FADC

« Complaints are growing but that is good news says FSCLFMA sets expectations for issuers of ‘green’ and ‘responsible’ funds »

Special Offers

Comments from our readers

On 14 December 2020 at 4:10 pm Comprehensive Planner said:
I can only aplude the comments made by the chair FADC when he state that the FMA had gone overboard with the documentation for the prosecution.
It appears that they have also taken a tightly prescribed view of the application of the Act rather than looking at it from a Principled basis.
Admittedly there are few facts given in the report and possibly the adviser could have done better, but has she actually broken the Principle of the Act? I don't necessarily support her view of "advice" or "Client" please show me where there is harm given we are expected to interpret a Principles based piece of legislation.
On 14 December 2020 at 5:29 pm lewiboy said:
This looks a lot like setting the stage for a Salem type witch hunt.
On 15 December 2020 at 8:39 am w k said:
i suspect, none of these policy makers / auditors have much practicing experience, if any. they may have a string of academic qualifications in their bag, but theory and practice aren't the same. just an example, of all the predictions made by the well educated economists, how many times were they right or wrong?

perhaps, it's time that to make it mandatory that ALL policy makers / auditors MUST have at 10 years' working experience in the respective field of finance - that means, the people making policies for the insurance sector. must have more than 10 years' working experience in the insurance sector.
On 16 December 2020 at 12:23 pm All hat no cattle said:
on the one hand they could have a point that this adviser's interpretations are wrong.

On the other, this does look a little like "I have never been an adviser, I don't know how to do your job, but my clipboard says you are doing it wrong".
On 16 December 2020 at 1:04 pm Murray Weatherston said:
Does anyone else find it ironic that about 3 months before the terms "personalised advice" and "class advice" are to be consigned to the scrapheap, a case has arisen that prima facie hinges on the dtermination of when advice actually tips over the boundary into "personalised advice".
I deliberately avoid comment otherwise because we have but fragments in the reporting - did you see the case file is 3000 pages long - at 300 words a page that's 900,000 words and I guess the article is only 900 words long.
Experience tells me never comment on a case until all the facts are known, and even when all the facts are known, breathe very long and very deeply before entering into commentary.
On 17 December 2020 at 10:11 am w k said:
@murray, i also find it ironic that people who have virtually no experience in advisory and sales can dictate advisers what and how to do. for a good customer / consumer outcome, eh?

@all hat no cattle, pls allow me to replace "look a little....." with "it is obvious that i have never been an adviser......"

Sign In to add your comment



Printable version  


Email to a friend
News Bites
Latest Comments
  • Are robots the future of advice?
    “Yeah/Nah another article talking financial advisers but really means to say financial planning... The bespoke needs of...”
    5 days ago by JPHale
  • [The Wrap] FSLAA isn't the only big change advisers need to be aware of
    “I watch with hope that FMA will decide to investigate potential and existing sharp practices that are nothing less than fraudulent,...”
    6 days ago by Chatterbox
  • Are robots the future of advice?
    “The majority of the 9,000 consumers surveyed globally said that they trust robots more than humans to help manage their personal...”
    6 days ago by All hat no cattle
  • Are robots the future of advice?
    “What a load of tripe - produced by someone with something to gain. The global experiment with RoboAdvice has demonstrated...”
    6 days ago by Pragmatic
  • Are robots the future of advice?
    “Of course Oracle would produce research supporting their products!! No surprise there. However, I doubt very much if serious...”
    6 days ago by dcwhyte
Subscribe Now

Weekly Wrap

Previous News
Most Commented On
Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA 4.55 2.29 2.59 2.65
ANZ 4.44 2.89 3.25 3.39
ANZ Special - 2.29 2.69 2.79
ASB Bank 4.45 2.29 2.59 2.65
Basecorp Finance 5.49 - - -
Bluestone 3.49 3.34 2.99 3.34
BNZ - Classic - 2.29 2.59 2.79
BNZ - Mortgage One 5.15 - - -
BNZ - Rapid Repay 4.60 - - -
BNZ - Std, FlyBuys 4.55 2.89 3.19 3.39
BNZ - TotalMoney 4.55 - - -
Lender Flt 1yr 2yr 3yr
CFML Loans 4.95 - - -
China Construction Bank 4.49 4.70 4.80 4.95
China Construction Bank Special - 2.65 2.65 2.80
Credit Union Auckland 5.45 - - -
Credit Union Baywide 5.65 3.95 3.85 -
Credit Union South 5.65 3.95 3.85 -
First Credit Union Special 5.85 2.95 3.45 -
Heartland Bank - Online 2.50 1.99 2.35 2.45
Heretaunga Building Society 4.99 ▼3.40 ▲3.50 -
HSBC Premier 4.49 2.25 2.35 2.65
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - ▲2.25 - -
ICBC 3.69 2.25 2.35 2.65
Kainga Ora 4.43 2.67 2.97 3.13
Kainga Ora - First Home Buyer Special - 2.25 - -
Kiwibank 3.40 3.20 3.50 3.50
Kiwibank - Offset 3.40 - - -
Kiwibank Special 3.40 2.35 2.65 2.65
Liberty 5.69 - - -
Nelson Building Society 4.95 3.20 3.24 -
Pepper Essential 4.79 - - -
Resimac 3.39 3.35 2.99 3.35
Lender Flt 1yr 2yr 3yr
SBS Bank 4.54 2.79 2.79 3.15
SBS Bank Special - 2.29 2.29 2.65
Select Home Loans 3.49 3.34 2.99 3.34
The Co-operative Bank - First Home Special - 2.09 - -
The Co-operative Bank - Owner Occ 4.40 2.29 2.59 2.79
The Co-operative Bank - Standard 4.40 2.79 3.09 3.29
TSB Bank 5.34 3.09 3.29 3.45
TSB Special 4.54 2.29 2.49 2.65
Wairarapa Building Society 4.99 3.55 3.49 -
Westpac 4.59 3.09 3.29 3.39
Westpac - Offset 4.59 - - -
Lender Flt 1yr 2yr 3yr
Westpac Special - 2.29 2.69 2.79
Median 4.55 2.73 2.99 2.80

Last updated: 7 April 2021 10:22am

About Us  |  Advertise  |  Contact Us  |  Terms & Conditions  |  Privacy Policy  |  RSS Feeds  |  Letters  |  Archive  |  Toolbox
Site by Web Developer and