The biggest challenge for advisers

The most difficult thing advisers will have to deal with under the changes proposed by the task force on financial intermediaries will be the requirement to disclose the difference in returns in dollar terms of investments.

Wednesday, November 16th 2005, 7:01AM

High-profile adviser Murray Weatherston says under the proposals advisers will have to tell clients the difference, in dollar terms, between gross returns and net returns.

This proposal will have the affect of showing people who is clipping the ticket on investments and how much they are taking. Weatherston, speaking at the Society of Independent Financial Advisers conference in Napier on Saturday, said it is still unclear how this proposal will work – whether it is on a product-by-product basis or some other form.

It also throws up some challenges for organisations such as banks and finance companies in terms of working out what the gross returns will be.

Weatherston says such a move on disclosure could force advisers to adopt a fee-for-service model.

He believes the task force got it wrong when it made an assumption that financial advisers only deal with high net worth clients who have more than $100,000 to invest.

Most advisers have clients with less that that amount to invest and in many cases a commission-based remuneration model is appropriate.

Weatherston told delegates that the Ministry of Economic Development are seeking cabinet approval to push ahead with the co-regulatory approach proposed by the task force.

His view is that implementation is likely to be in early 2008.

Weatherston was also of the view that the current industry bodies will not be the Approved Professional Bodies (APBs) which regulate advisers. APBs will have a very narrow range of roles and there will then be industry bodies around them.

This is a view that Task Force member Ross Kent has also expressed and has been reported earlier in Good Returns.

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