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Financial advisors shock Consumer
Thursday November 5, 12:40 PM
The Securities Commission says reforms which are already underway will help address the poor performance of financial advisers highlighted by Consumer New Zealand.
The consumer lobby group went undercover to get advice from 33 financial advisers and is shocked about the results.
The advice was put to an expert panel for analysis. Of those 33 companies approached only 17 plans were formally written up. The others either missed the deadline or only offered oral advice.
Consumer chief executive Sue Chetwin says it is appalling that only three of the plans were worth the paper they were written on.
She says some of the advice was just wrong while other plans were so confusing the experts could not make heads or tails of them.
Ms Chetwin wants an end to the system whereby advisors get paid commissions for the financial products they recommend. She says advisors should be paid for the advice they are giving and not the products they sell.
The Securities Commission's Commissioner for Financial Advisers, Annabel Cotton, says the findings are very disappointing but not surprising as the industry has been largely unregulated until now.
"Investors must be able to trust the advice they get and that's clearly not the case.
"The Commission is working with other agencies and the industry to put in place a framework to make financial advisers more accountable. We expect to have this in place by the end of next year."
Some of the key changes include:
* The registration of financial advisers with the Companies Office with the register available to the public;
* Financial advisers providing advice on investments such as shares, managed funds or futures, will have to be authorised by the Securities Commission
* Authorised financial advisers will be bound by a code of conduct setting minimum standards of competence, ethical behaviour and client care
* The Securities Commission will regulate the financial advice industry and monitor compliance with the Code of Conduct on an ongoing basis.
The Securities Commission will be able to take action to suspend or ban authorised financial advisers if they breach the Code of Conduct
Ms Cotton says investors should also be aware that under the existing law, financial advisers are required to provide clients with a written disclosure statement outlining their credentials, fees and any relevant interests before giving any advice.
The commission's tips for choosing a financial adviser include asking who the advisor is, whether they belong to a professional adviser association, their qualifications and experience and whether they work for themselves or an organisation. Investors should get a written disclosure statement before getting advice or paying money.
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