Advisers should regulate themselves: Stubbs
Former Tower Investments chief executive Sam Stubbs says the financial adviser profession should regulate themselves rather than stick with the current structure.
Thursday, July 24th 2014, 6:40AM 
10 Comments
Stubbs said, in a key note adddress of the Institute of Financial Advisers conference yesterday, that it would be far better if there was one industry association and that advisers regulated themselves.
He said other professions self-regulate themselves and financial advisers should try and do the same.
Stubbs said there shoud be one association and it should be compulsory that advisers join it. His view is that "your peers would be a lot tougher on you than a third party."
He also says that such a move would be paramount in helping build consumer trust as it would show the public that advisers are serious about their profession and standards and are wiling to throw out members who don't comply.
Advisers who bring their profession into disrepute are doing damage to the livelihood of good advisers, he says.
When regulation of the sector was being developed the option of self-regulation was on the table and the industry's preferred position however the government opted for the current arrangements as the industry was, at that stage, not united.
Institute of Financial Advisers chief executive Fred Dodds says he personally supports the idea of self-regulation.
"My take is that’s the best thing that could happen," he said.
He would like to see self-regulation back on the table as an issue as it would "tidy everything up."
Dodds says that advisers would be better at policing their people and they could say to errant advisers "we don't want you in our profession."
He likes the idea of one big association and says it's no secret that the IFA and PAA have "had a cup of tea" together. However there are no plans on the table.
Product providers would prefer to deal with just one association, he said.
The Financial Advisers Act is due for a review next year.
| « Advisers encouraged to take ethics courses | IFA working on pro-bono offering » |
Special Offers
Comments from our readers
On 24 July 2014 at 8:46 am Brent Sheather said:
At the risk of being labelled a disagreeable person again I must say that I strongly disagree with this suggestion. Anyone who thinks industry associations could regulate advisors in any way, shape or form should read Gareth Morgan’s book “After The Panic” and in particular his comments about the IFA and the fact that many of their senior members were responsible for some of the worst behaviour particularly involving finance company debentures. Certainly every investment recommendation I saw from IFA members at the time were full of finance company debentures simply because they paid the highest levels of commission.
Their idea of self regulation is like putting the foxes in charge of the hen house and is ridiculous in the extreme. It’s quite obvious however that the FMA board does need more experience in the retail advisory area so they need to get someone who is retired and is experienced in the sector onboard. They need to choose carefully and pick someone who knows what best practice looks like.
On 24 July 2014 at 9:59 am R1 said:
I suspect that advisors self-regulating would be about as successful as the real estate agents have been and we know what their reputation is like. In my opinion the associations are way too 'mickey mouse' to take on a regulatory role.
An FMA with the right skills and experience along with a Code Committee and FADC that have independent members that are not conflicted (I like Brent Sheather's idea of retired experience) would be a far better regulatory environment.
Just need to get the right people in the right places, which we do not appear to have now, along with very clear standards and guidelines which again are clearly lacking at this time.
An excellent governance group is the first step and this needs to be dealt with now.
On 24 July 2014 at 11:51 am btw said:
I recall an interview with the CFO of Goldman Sach who, immediately post –GFC, pleaded for more financial regulation, otherwise Wall St was just going to do it again, human nature being what it is…(not their fault in other words). He was essentially saying that if you set the bar low the industry will follow suit. Self regulation is setting the bar too low.
One would think the Finco collapse would have demonstrated that to the industry (certainly it did to the investors).
On 24 July 2014 at 12:10 pm graeme tee said:
Foxes in charge of the hen house or poachers turned game keeper, what a choice, but that is NZ for you!! the fact that there are a number of professional assn shows a certain disfunction within the industry and a clear lack of what "best practice" looks like. Also is Mr Stubbs suggesting that insurance and investment are so similar that insurance agents can self regulate the investment advisors? Clearly ridiculous and his comments should be consigned to the vested interest file. On 24 July 2014 at 1:21 pm JP said:
This is typical of the IFA. They have always wanted to be the Policeman. It is not for peer review sake but for being the Policeman sake. Interesting to note that their maximum fine they charge their members is bigger than the FMA will fine. In fact the FMA is keen to keep people in business and will guard the privacy of those they fine, but not the IFA. Tell all and fine them big, because we are the Policeman.
Well let me tell you all this, unless you can trust each other how can you tell your clients to trust you. Yes you. In our area I have started our own review peer group. Not related to the IFA for the purposes of self review. It is going well and we all contribute. There are 7 of us and we are happy for others to join. We look at what we do and how we can do it better. We discuss cases and what we do with them and how we advise. I would never do it with the IFA as I can never trust them.
On 24 July 2014 at 3:51 pm w k said:
Someone with 30yrs' practicing experience and professional qualifications in the field of practice applied for a job FMA advertised didn't even get an interview. What do you think? On 24 July 2014 at 4:15 pm David Whyte said:
While the idea of self-regulation appeals, practical experience here and overseas has seen the concept largely discredited.
As others so eloquently point out, the process is too vulnerable to capture, and the conflicts of interest too intense to make self-regulation a practical reality.
Solicitors and Accountants seldom, if ever, recommend third party product provider solutions, as is common practice in the RFA/AFA world, and therein lies a significant difference.
There is however, considerable merit in the suggestion that a regulatory body contains the breadth of industry experience, intellectual capacity (i.e.common sense), and governance capability to render a co-operative regime effective.
A great deal of energy, time, and resource seems to be wasted when the regulatory regime descends into open conflict, sabre-rattling, and gun-slinging (if you'll excuse the mixed metaphors).
Managed sensibly and with a reasonable degree of vigilance based on knowledge and understanding of the market, preventative measures should be capable of being developed - rather than the reactive regime which seems to prevail currently.
The ongoing difficulties in Australia may well stem from the adversarial nature of their regulatory environment - NZ has an opportunity to take a more consensual approach to achieve a more effective outcome for consumers, investors, AND industry practitioners.
The objectives of the regulatory body and the industry need not be mutually exclusive or contradictory. Indeed, most thinking advisers, their representative bodies, and the product providers, have all expressed support for regulation, but it needs to be promulgated for the benefit of ALL participants willing to observe the principles articulated.
On 25 July 2014 at 9:58 am best adviser said:
The sooner the "industry" accepts that investments and insurance are completely different in so many ways, not the least the technical knowledge required to do the job properly, the sooner we will accept the need for two separate professional associations.
Probably more important though, the FMA needs to recognise that they need to start employing some industry professionals. Lawyers and accountants and "compliance" professionals do not have the technical skills or understanding of how the industry actually works to understand the impact of our laws or the how to properly judge acceptable behaviour, unless they have spent significant time working in (not for)the industry concerned. One just needs to look at the debacle with the exemptions in relation to uninvited direct sales to see how badly the broader financial services industry is misunderstood by our regulators and law makers.
On 31 July 2014 at 8:31 pm Ellie Broderick said:
Is the Minister listening?
Its clear that the FMA could do better. It starts with appointing better directors who have a broader understanding of the financial industry. In turn they can encourage the FMA CEO to appoint some former industry practitioners into senior roles.
Or how about an advisory board of former practitioners?
Sign In to add your comment
|
|
Printable version |
|
Email to a friend |
Whilst I don't agree that the current administration involving an inept regulator is the correct approach, the reality is that the financial services has had the chance to self-police, and failed.
The appropriate approach probably lies somewhere in between - whereby the industry and regulator work collaboratively to govern financial services.