Letter: Money Managers not happy with comments made by FPIA boss

Money Managers takes exception to comments about its modus operandi made by the chief executive of the Financial Planners and Insurance Advisers Association.

Tuesday, January 22nd 2002, 10:35PM

Dear Chairman and Board members

I am writing to inform you of how Money Managers treats standards, ethics and disclosure and to offer your chief executive the opportunity to view them. This follows the FPIAA’s chief executive’s comments in a recent National Business Review article about our company and one of our products. Although his comments are not targeted directly at us, it is the third time he has commented on disclosure in a media article concerning Money Managers. We would much prefer he was aware of what it is we do. We are confident we comply not only with your rules but the Acts of Parliament and the current academic consensus in providing investment advice to New Zealanders.

Money Managers has, since the introduction of the Investment Advisers Disclosure Act 1996, required mandatory disclosure by all its franchise owners and advisers at the first interview. Our disclosure document is updated whenever a material change to our business takes place. Our disclosure process is managed from head office and is prepared for us by Russell McVeagh barristers and solicitors Auckland. We are currently using our 11th version since the disclosure laws were introduced.

In addition to this we provide in house training for both advisers and staff. We require an annual practicing certificate to be held by our representatives and this has ongoing educational requirements. Our offices and advisers are all audited annually and their agreements are terminated by us should they not attain the required standard. These standards include strict adherence to our asset allocation and investment advice standards that are prepared in conjunction with FundSource.

Money Managers has over 30 advisers who currently hold the Diploma from Massey University and many more are studying towards theirs. We also have 12 accountants, most of whom are members of the Institute of Chartered Accountants of New Zealand, and a small number of solicitors who represent us at adviser level. Many of our senior advisers who are near the end of their careers have previously held senior banking or finance company positions or have come from a funds management related background.

Many of our advisers have relinquished their IAFP/FPIAA membership and Registry/CFP status as they felt over time it did not provide additional value to that they were able to gain internally, and were already paying for.

Money Managers currently have approximately 100 investment advisers, and to our knowledge only 3 are members of your association. One of these is Alasdair Scott, our marketing director who helps ensure we continue to exceed your association’s standards.

We have previously discussed the possibility of a corporate membership of your association. We were offered a small discount on membership fees. This however is not workable. Our regional owners and advisers have annual commitments that include two conferences; one of these is a four-day compulsory programme, and training courses (one full-day compulsory event, and a one-two day "quality review" or audit), in addition to many other conference calls and product training programmes. These are a huge cost and time commitment to our franchisees already. To then be subject to a repeat of this same process from the association would be a much greater cost. We also take into account that much of the way we do business is proprietary systems and processes that we are not comfortable in sharing with the rest of the industry. This means we are still some distance from being in a position to actively participate in your association.

We would like to make it clear that should a suitable corporate membership programme become available that included a number of important criteria we would be enthusiastic about membership. These criteria should include but not be limited to, where a company’s systems, processes, standards and audit programmes are annually approved and annual practicing certificates issued to the company’s head office. This would mean they are an approved environment. The responsibility of its representatives would then fall to them. Perhaps there is a model elsewhere, in Australia or USA. We would be happy to participate in creating a workable corporate membership programme. We also believe that this would allow for a cost effective way of completing the audit process for your association.

At Money Managers we take disclosure very seriously. At our recent annual conference in Taupo, Jane Diplock, executive chairman of the Securities Commission, spoke to all our franchisees and advisers. Her comments regarding self-regulation or the alternative of government regulation gave a clear direction to industry participants: either we work together and self-regulate, or they will legislate. We believe an industry association that publicly speaks out against either members or potential members will always find it difficult to create the level of co-operation required to include all industry participants.

We don’t believe the association could convince its members that legislation is a better answer. We are disappointed with Mr Mathews’ comments to the media, and suggest this approach could be short-sighted.

We hope we are able to keep the dialogue open and that one day we are closer to helping all concerned move to an industry regulated by itself. We invite the chief executive or a member of the board of the FPIAA to visit our offices in Auckland at any time to review our current practices and investment advice standards. We would be more than happy to show them through our business and allow them to view our disclosure and internal compliance regime working.

Yours faithfully

Alan Anderson

Franchise Director

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