Weekly Wrap: Advisers brace for more bad news

As we reported on Monday a new group has been established to root out bad advice. This group Exposing Unacceptable Financial Advice (EUFA), is headed by Suzanne Edmonds who has experience in this sort of thing and told Good Returns that when she gets a task like this she is like a dog with a bone.

Added to this is the latest missive from Kapiti sharebroker Chris Lee. He claims many investors have outlined to him some of the advice they have received from advisers, and, taken at face value, it doesn't make pretty reading.

If what is alleged is true then advisers are in for a rough time. I have no doubt some in the media are going to relish being handed such powerful ammunition.

It will be fascinating to see what the industry response is. It's been nice to see the IFA finally put something out this week, however it hasn't had a huge amount of pick up in the media and, while described by some as going on the front foot, I suspect more is needed.

Comments like this from the ceo are very frank: "We cannot say 'all IFA members are able to be trusted to give good advice all the time' as some may have been negligent over Bridgecorp – probably very few."
He says if members haven't acted properly" "We will do something about it."

In my view the greatest thing the advisory industry could do is make sure that it is actually disciplining members. Many years ago when one of the IFA's predecessors made a decision on a complaint the quote about "Sunlight being the best disinfectant" was used. How true that is all these years later.

The other big news continues to be finance companies. I reckon with in this environment we are likely to see one small company a week tip over for a few more months. Hopefully the media will get sick of the body count and move onto something else!

There is good news in the sector – the big players are holding up well and the regulators are doing things. In our story today the minister is talking of toughening up trustees' powers supervising finance companies.

Also the NZX is asking questions about some of the listed debt securities.