Regulation leads to poor quality: Academic

An academic who has worked closely with the Financial Services Council says there are only 1500 “useful” insurance advisers operating in New Zealand.

Monday, March 4th 2013, 6:00AM

by Benn Bathgate

Dr Michael Naylor, of Massey University, said regulation had multiplied the number of poor quality advisers operating in New Zealand.

And Naylor, who worked with the Financial Services Council on their report into underinsurance, said good advisers had their scope limited.

“Once you start being an adviser who does the job properly you can’t actually deal with that many clients… the number of useful advisers in the country is 1500 or so, and they deal with the richest section of the middle class.”

There are just under 2000 authorised financial advisers and more than twice that number of registered financial advisers.

Naylor said the higher regulatory burden on investment advice had led to less capable advisers focusing on the life sector.

“[Regulation] has had a huge impact on the insurance area because people who were marginal have left the investment area and moved to insurance. There’s good people but the number of bad people has multiplied,” he said.

“The other thing is as costs have risen a number of advisers have moved to the product groups where they get lots of support from suppliers but are restricted in the products they sell.”

Professional Advisers Association chairman Peter Leitch said Naylor’s comments were “ridiculous”,.

“There are more than enough people who need good insurance advice, and New Zealand doesn’t have enough advisers. We need to be encouraging consumers to seek advice, not somehow suggesting that the people giving advice aren’t good.”

Leitch also said there was not enough attention paid to the role of advisers at claim time.

“I’m sure if we looked at the degree of advocacy advisers’ give their clients at claim time, the results of a claim are better if they have an adviser than if they don’t.”

Benn Bathgate is a business reporter for ASSET and Good Returns, email story ideas to benn@goodreturns.co.nz

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