Financial adviser reforms too late: Consumer NZ

Far-ranging reforms in the financial adviser industry are too little, too late, according to Consumer NZ chief executive Sue Chetwin in the wake of a damning investigation into the state of the industry.

Chetwin said the government needs to effectively protect people immediately after a Consumer 'mystery shopper' investigation found the advice given to prospective clients to be "scandalously poor." 

"This is an industry in serious need of reform," Chetwin said in a statement. "We're concerned that skill levels are low and will remain low, unless competency standards are included as part of the adviser authorisation process due to come into force next year."  

The government has been working to overhaul the industry since it introduced legislation in 2008 to bring in new regulations and competency requirements for advisers late next year. The regulations include a new code of conduct for advisers, introduce a new disputes resolution service, and will see the Securities Commission take on a regulatory role for the sector.  

Commissioner for Financial Advisers Annabel Cotton said the reforms underway will address the poor performance highlighted in the investigation.  

"The findings are very disappointing but not surprising as the industry has been largely unregulated until now," Cotton said. "Investors must be able to trust the advice they get and that's clearly not the case." 

Consumer NZ mystery-shopped 33 financial advisers and had an expert panel assess the quality of 17 investment plans, seven of which were pre-retirement plans. Only three were rated good by the panel, with the rest either disappointing or rejected.  

Chetwin said there was "poor analysis, unclear costs, advisers portraying themselves as independent when they were not, high costs and bad products" and was critical of advisers receiving commission for products that they sell.  

"Consumers need access to unbiased advice, but this won't become an industry norm until commissions are banned," she said.  

Another issue highlighted in the research was that poor information given to the mystery shoppers by advisers, and improved disclosure standards were urgently needed. 

"The information was so poor, so even if you wanted to understand it, you couldn't," she said.  

-BUSINESSWIRE