FMA's targets identified
Loan sharks, registered financial advisers giving investment advice and QFE staff that are under trained and under supervised are all in the sights of the Financial Markets Authority (FMA).
Thursday, September 22nd 2011, 6:51AM 
3 Comments
by Benn Bathgate
FMA chief executive Sean Hughes told Good Returns the watchdog had already started a surveillance campaign, and outlined some of the priorities for the regulator.
He said one area of particular interest was money lenders and credit providers, "particularly those who are offering short term, high interest credit on what could be seen as disadvantageous terms."
"That is an area where we are currently working with one of our regulatory colleagues to address," he said.
Hughes also said the watchdog would focus on unregistered advisers that continued to provide advice, registered financial advisers (RFAs) offering advice on complex, investment products and QFE staff.
"Employees of QFEs who had not received sufficient training or who are not being adequately supervised - but are nevertheless giving financial advice to customers of that QFE - or worse still, to non-customers of the QFE, we would see that as outside the perimeter."
Citing the previous action the FMA had taken over KiwiSaver sales practices, Hughes said the retirement savings scheme would remain a focus due to its integral role in New Zealander's retirement saving.
He said the FMA would be interested in the quality of advice new entrants to the scheme receive as well as ongoing advice around issues such as switching, asset allocations and partial withdrawals.
Another aspect involving KiwiSaver Hughes said the FMA would focus on was the danger - as balances grow - of pension mis-selling.
"When I was working in Australia there were a number of issues involving illegal early access to superannuation funds, using unregulated financial intermediaries. A number of these intermediaries charged quite extraordinary commissions or fees to enable low income or disadvantaged people to try to get access to their superannuation funds," he said.
"We just want to be absolutely sure that we're vigilant about it."
Benn Bathgate is a business reporter for ASSET and Good Returns, email story ideas to benn@goodreturns.co.nz
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Comments from our readers
This has happened because the advice has been about navigating employer superannuation schemes *around* KiwiSaver, and coming up with cunning plans to confound it.
The employers and trustees who are now stuck in a world of never-ending deed amendments and baffling and expensive legal issues have got there under this professional advice. They didn't do it all by themselves.
Other employers correctly took KiwiSaver as their cue to simplify their schemes dramatically. They are not facing the same issues.
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While registered financial advisers may not give personalised financial advice to a retail client with respect to certain types of investments, the Financial Advisers Act 2008 recognises and sanctions their right to provide financial and investment advice to any client who is not a retail client. Moreover, that advice can be in relation to the most complex of investment products.
The most highly qualified and experienced financial and investment advisers continue to be anything other than AFAs. They continue to provide financial and investment advice of the highest quality to, for example, the trustees of superannuation and KiwiSaver schemes, and to corporates. That advice continues to be in respect of total assets far in excess of any amounts advised on by all AFAs put together.
Not everyone wishes to be coloured with the reputation earned by 'financial planners', a reputation which cannot be erased by legislation, nor to be put through ‘financial planning school’ in order to be permitted to undertake an activity which they are already better equipped to perform. That is one reason why New Zealand’s most qualified and able financial and investment advisers will never become AFAs, at least not under the present AFA regulatory focus on ‘financial planning’.
Perhaps the most ill-conceived aspect of the new regime is that a registered financial adviser is permitted to provide advice to the trustees of a $100 million superannuation or KiwiSaver scheme on where and how its funds ought to be invested on behalf of its 10,000 members, but when one of those members exits the scheme the registered financial adviser is no longer permitted to advise that member on where and how the member’s funds ought to be invested. That is one of the first oddities of the regime which needs to be corrected.