Are all views equal?
How much should consumer feedback drive the review of the Financial Advisers Act?
Wednesday, June 17th 2015, 6:00AM 
6 Comments
by Susan Edmunds
That’s the question being asked as MBIE courts consumer opinion.
It has developed a brochure for consumers, explaining adviser regulation and asking for consumers’ views on the industry, what is working and what needs to change.
It asks questions such as whether the consumer understands the differences between the types of adviser and what impact commissions have on their level of trust in their advisers.
That feedback, along with submissions in response to the recently-released issues paper, will inform the options paper that will be delivered to the Commerce Minister.
But Pushpa Wood, director of Massey University’s Fin-Ed Centre, said MBIE had not gone far enough to engage consumers.
She said all the communication that had been issued so far about the review required consumers to have a reasonable degree of financial literacy to engage with it.
It would not connect with the most vulnerable consumers.
“At the moment I’m seeing industry-level feedback. If the consumer voice doesn’t come into that, it will be the industry reforming the industry, financial advisers looking at how we can do our jobs better, but for who? We still need to look into that.”
But adviser and SiFA chairman Robert Oddy said there were risks with relying heavily on consumer engagement.
“The problem for consumers if that they may be unaware of what they don’t know. They may be matching returns with interest rates in the bank. They may not understand very much about their investment options, the limitations and benefits. Asking people who haven’t had a lot of exposure to this area is problematic It’s a bit silly asking people to comment on things they don’t understand, if it’s foreign to them."
Oddy said it was important to find a way to encourage people across a range of sectors to offer their feedback to MBIE on the review.
Then those crafting the upcoming options paper would need to take those on board, he said.
“The most damaging thing would be if a lot of people provided views only to be ignored.”
IFA chief executive Fred Dodds said it would be important to gauge consumer opinion to determine whether regulation had achieved its stated aim of improving confidence in advisers. But how the questions were asked would be important.
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Comments from our readers
It is also worth remembering that the consumer keeps all of us employed (including the Regulator). I’m unsure how the financial services industry is able to exceed consumer expectations (or event match these) when the consumer hasn’t been asked. I would have thought that a useful starting point for this to occur is in forums such as the review of the Financial Advisers Act… just saying…
Should the costs in a product reflect fair value - I believe so.
Should advisers be required to provide low cost advice - no.
Have you found your doctor, accountant, lawyer, painter, electrician providing low cost services lately?
Advisors are required to put their clients' interest first and 'eating' a significant chunk of the returns through high fees is definitely not doing that.
Perhaps if there was an opt-out option for the add-ons many use to justify a higher fee then they could argue otherwise? I still don't think it is ethical when the primary objective is returns to the client consistent with the risk they take; but that is me. Wonder what the FMA thinks?
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