Tower's Bevin takes aim at Morgan
Tower chief executive of investment business Paul Bevin has hit back at criticism of financial advisers by former economist and adviser Gareth Morgan.
Thursday, May 20th 2004, 6:24AM
by Rob Hosking
Morgan has criticised financial advisers for taking commissions from financial services firms (such as Tower) saying that such advisers cannot be said to be providing disinterested advice to their clients.
“Many businesses negotiate discounts from preferred suppliers,” says Bevin.
“Should they be forced to divulge that their use of these suppliers' components is influenced by these discounts? The notion is absurd.”
There has been a big trend in the industry over recent years for advisers to beocme more independent and to want to be able to offer a choice of products they can recommend to clients.
“Through their direct relationship with the investors they advise they exert considerable 'buying' power over the plethora of products and suppliers available. Customers have choice and that is what promotes fair dealing and ultimately weeds out cheats. Most attempts to regulate, on the other hand, raise costs and reduce competition.”
Financial services firms such as his invest heavily in their brand and reputation, Bevin says, and will of course want to reward advisers who support that brand. But he says Tower also supports fee-based, rather than commission-based, advisers as part of its distribution mix.
“Gareth attacks the Financial Planners and Insurance Advisers Association. While the FPIA may not yet have established a credible brand for its members, that is no reason to call for a regulatory sledgehammer to put commissioned 'advisers' out of business. Brands take time to build.”
The current model of the industry, which offers a choice of models, seems to work, he says.
“Not everyone wants a fee-based advisory service like the one Gareth offers. Obviously, planners and advisers, whatever they choose to call themselves, should not misrepresent their recommendations as being independent if they are receiving commissions. I doubt many do, however, and outright misrepresentation has normal legal remedies that should be enforced.”
Any client should be able to realise that if they are not paying an advisory fee they are not getting an independent view, Bevin says.
“That does not mean they are being offered a poor deal or bad advice.”
Rob Hosking is a Wellington-based freelance writer specialising in political, economic and IT related issues.
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