Financial advice subsidy would mean more AFAs
The Professional Advisers Association has backed the call for a government subsidy for financial advice on KiwiSaver, saying it would increase the number of KiwiSaver members and AFAs.
Thursday, February 23rd 2012, 6:00AM 
11 Comments
by Niko Kloeten
The idea of using some of the tax credits paid out to KiwiSaver members for those members to get financial advice originally came from the Institute of Financial Advisers.
Its concerns about the lack of advice on KiwiSaver were confirmed when a study found fewer than 20% of KiwiSaver members had used the services of a financial adviser.
PAA chief executive Edward Richards said his organisation would support some sort of government assistance to provide easier access to financial advice for those in KiwiSaver.
"I think the idea is worth considering, although whether the government would take it seriously in the current fiscal environment I'm not sure."
And he said the advice would be just as important for those not in KiwiSaver, many of whom have chosen not to enter because they think the government manages the scheme.
"People have got to realise if more people get financial advice on KiwiSaver more people will be in the scheme," he said.
Richards said many KiwiSaver members either can't afford financial advice or don't understand the value proposition of it; meanwhile, the way KiwiSaver has been set up means there's little money in for advisers.
With under 2000 AFAs nationwide it is doubtful there is the capacity in the industry to advise the nearly two million KiwiSaver members (not to mention non-members), but Richards said a subsidy could increase AFA numbers.
"It might encourage more people to become AFAs because then it will be worthwhile giving advice on KiwiSaver," he said.
"There's a certain number of advisers out there who won't give advice on KiwiSaver because there is not insignificant risk attached to it, and no return."
Niko Kloeten can be contacted at niko@goodreturns.co.nz
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Comments from our readers
"If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it". ~Ronald Reagan.
Now you want to see if you can collect some of the cream from the Crown by offering worldly advice on KS; but alas it doesn't pay enough for you to bother with? That must be a tough position for you to be in.
Here was me thinking advisers actually put client interests before their own short term personal financial gains. Don't worry about the longer term proposition with clients will you?
Greed, greed, greed and you wonder why the general public has such a low perception of advisers.
At the end of the day - I believe I gave insurance clients good advice to join KiwiSaver and then put them with an excellent provider with funds that are still performing in the top quartile.
Obviously I am very annoyed that I can't keep on encouraging people to join KiwiSaver or transfer to a company doing much better than their current one (usually allocated), as I am not an AFA.
Lets face it, all the Kiwisaver providers are so tightly regulated by Government that it's an easy to follow step-by-step process for any intelligent adviser!
After all the shuffling by advisers with the new regulations I still don’t understand two things; why RFA advisers are reluctant to meet a rather low threshold to become an AFA and why a lot of those advisers that have qualified to meet the minimum AFA standard don’t appear to want to strive for the maximum standards i.e. CFP, CLU, CFA? Who ever heard of someone wanting to be taken seriously in an industry who proudly meets a MINIMUM standard?
Seriously putting out one's hand for subsidies from the long suffering taxpayer is poor form and a bad look. Bodies such as the PAA are supposed to create a positive view and this rubbish does not help.
How about creating value rather than expecting someone else to fund you.
This creates cynicism about our industry from the public
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Recent legislation introduced by the government sends a clear message about the importance of financial advice and the requirement for all advice around investments to come from suitably qualified Financial Advisers.
Meanwhile, Kiwisaver continues as a largely no-advice investment scheme.
The government is sending exactly the opposite message with KiwiSaver - 'do it yourself', with no need for advice.
Only some providers pay anything to Financial Advisers and it is insufficient to cover the cost of the time it takes to explain KiwiSaver and how investment markets work, let alone cover the risk the AFA is exposing themselves to if they give poor or incorrect advice.
2,000 AFA's cannot service 2 Million KiwiSaver members.
We need to encourage more people to become AFA's, or lower the requirment to give advice on KiwiSaver, but neither strategy wil be successful unless the government or the public are prepared to pay for advice which could result each individual KiwiSaver member receiving a far greater 'nest-egg' at retirment.