[Weekly Wrap] The consequences of giving bad financial advice

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What an interesting week we have had with calls for self-regulation, a warning from the FMA and an adviser facing a rather large court-ordered judgment.

Friday, July 25th 2014, 2:46PM 1 Comment

by Philip Macalister

Good old Sam Stubbs. In a thought provoking presentation to the IFA conference he raised the idea that financial advisers should all belong to one association and they should self-regulate.

With the review of the Financial Advisers Act next year this is certainly an issue that is likely to be on the table.

The idea of professionals policing their peers has a nice ring to it – but is it likely to fly? The odds on that are pretty low, but never say never.

Earlier in the week we reported on the High Court judgment that determined former adviser Andrew Robinson had been negligent and deliberately misleading with his client.

He has been ordered to pay $2.5 million to the client - whether any money changes hands is an unknown.

We did ask the FMA how regulation would stop this sort of thing happening again. Initially it seemed they were going to say something like, cases like this are a good deterrent for bad behavior. However now it’s a no comment as there is still another case to be heard against Robinson. We will ask the question again after that case.

However, FMA head of compliance Elaine Campbell did tell IFA members that if you behave they will be co-operate to you and not pedantic in their regulatory requirements.

Be "unco-operative" and or only "co-operate gudgingly and defensively", then you will see another side of the FMA.

Of course I attended the IFA Conference this week as I ran a plenary session on Tuesday. It was pleasing to see that the institute appeared to be in good heart and had a better turn out than some of the more recent events.

The IFA announced a deal to provide business ethics courses to members. Personally I think this is a good thing. As someone who is doing some training and up skilling I’m supportive of these ideas.

Interestingly enough some readers don’t think much of what is being proposed.

The FSC has put out another report – this time suggesting that KiwiSaver should have a capital guarantee.  This idea seems to have little merit. There are/have been capital guaranteed offers in the market and members have shown little appetite for them.

It would be far better for members to just get some decent advice and be invested in appropriate funds.

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