When advisers go bad
Two insurance firms are talking of the need for more professionalism in the financial advice industry after being burned by Queenstown broker Garry Patterson.
Friday, February 9th 2007, 6:50AM
by Rob Hosking
The two firms hit by his activities were Fidelity Life, and ING Life – both of whom were warned of Patterson’s activities.
Fidelity appears to have been hit the worst of the two. The company prosecuted on two counts of fraud, worth a total of $21,000, but these were only the two most salient cases. Operations manger Rob Norris says it is possible there were other cases "but that's harder to tell, the way renewal commissions are put." Three years ago Patterson was expelled from the Life Brokers Association but was able to continue working in the industry.
At the time Fidelity chief executive Milton Jennings defended Patterson, saying his company had no problems with the broker.
Jennings says even now that Patterson’s actions “seem a bit out of character”.
“He made a stupid decision and it should have been obvious to him he was going to get caught.
“You have to feel a bit sorry for the guy. What does he do now?”
ING Life managing director Naomi Ballantyne takes a similar tack, saying, “If he was short of cash he should have approached us.”
She also says that although there had been warnings about Patterson, “lots of advisers do badmouth each other, and when we asked for facts none were forthcoming.”
Once the tombstoning was picked up, however, “we went back to make sure we hadn’t had a rogue adviser on our books for five years.
“We’ve been through everything and there seems to be only the one case. And I don’t think he had tombstoned before.” Ballantyne also says that it is possible for formerly honest people to go off the rails.
“Good advisers do go bad – there are some early warning signs. One of them is when they have just had their fourth divorce and it’s getting a bit expensive.”
Both Jennings and Ballantyne say the case highlights the need for the financial advice industry to be put on a more professional basis.
“The biggest lesson for all advisers is to look to their own financial management,” says Jennings.
“From what I’ve seen all advisers who have got into trouble like this have just not had good cashflow management skills. They have either taken all their commissions upfront and got into trouble down the track, or they have not managed their tax situation properly.
“Then they start all this desperation selling and it leads to downfall. There have been some big writers who have fallen from the top because of this.”
Rob Hosking is a Wellington-based freelance writer specialising in political, economic and IT related issues.
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