Advisers should be mystery shopped: Report

The Retirement Commission has stepped into the debate of what the financial services industry should look like by commissioning a paper that produces some strong conclusions on disclosure and education.

Monday, July 4th 2005, 6:36AM

The paper “Improving Consumer Trust in the Retail Savings Industry” is written by economist Arthur Grimes who previously headed up the National Bank’s managed fund business and its now defunct asset management firm Southpac.

Grimes discusses why he thinks the savings industry isn’t working well and concludes with five recommendations, “each designed to improve trust in, and efficiency of, the New Zealand retail savings industry.” They are that:

All investment products should include a standard disclosure form outlining expected gross returns, expected net (after-fee) returns, and standard, simply specified risk measures that enable comparison across products
A mandatory requirement should be introduced for investment advisers to declare their fee income (from all sources) consequent on a client's product choice. The fee should be expressed in percentage and in dollar terms. A complete schedule of fees, including fees bundled into a product, should also be disclosed. It should be mandatory for investment advisers to offer a range of similar products to a client, each with fees disclosed as above.
The Retirement Commission's educational activities regarding investments and related fields should continue, and funding should be increased to enable the educational role and reach of the commission to be expanded.
The Retirement Commission, or some other body, should undertake a regular and comprehensive "mystery shopper" programme for financial advisers, and report the results publicly on its website so as to provide assistance for potential investors seeking an investment adviser.
A Financial Ombudsman should be created by statute in New Zealand to cover complaints across a broad range of financial services, modelled on the United Kingdom Financial Ombudsman Service.

« Dispute sees finance company change name

Sovereign takes regulation bull by the horns »

Special Offers