14pc of inquiries about advisers, FMA says

I think any reasonable person would take exception to Rob Everett’s comment that “we are committed to contributing to higher standards of behaviour”. That might be true overall as regards the retail advisory space but Mr Everett made it very clear with his infamous “polo shirt” comment that the FMA’s expectations of behaviour are less “higher” for vertically integrated providers. He made it clear with that comment, that financial providers who choose to only sell their own high cost products are doing the right thing, which a reasonable person would not buy, that that low standard of behaviour is okay with the FMA and meets the test of putting clients’ interests first. That sort of double standard not only looks wrong to any person with average intelligence it also looks wrong to the regulator in the UK who in their recent Threat Analysis highlighted vertically integrated organisations and the related potential for conflicted advice as an issue they need to do something about.

The fake news in the FMA annual report continues….. “we also want to encourage and help investors to make well informed decisions.” Mr Everett might have added...”however we are not prepared to require fund managers to disclose total expenses incurred…. rather we will muddy the waters further by requiring them to also produce the dollar amounts of fees paid” …..(which is confusing and of no use to anybody). “Furthermore whilst we publicly say that fees must be fair there is no way in the world we are going to upset anybody by defining what fair means” (either because we don’t know or don’t want to upset anybody). “In addition although we publicly say we want to encourage investors to make well informed decisions we are not prepared to publicly challenge our fund manager friends who consistently do their very best to misinform investors”.

The Donald Trump fake news award for this week therefore goes to the Financial Markets Authority.

A footnote to this story is that yesterday I got an email from a client who copied an email to her from a Senior Executive at the CFFC who told her “from March 2018 the annual KiwiSaver statement of fees has to include all fees including transaction costs”. I challenged him on this and he replied “my apologies for my misunderstanding. Sorry for the confusion”.

If a Senior Executive of the Commission for Financial Capability doesn’t know what’s going on as regards fees what’s the position as regards the knowledge of the average retail investor and how on earth can the FMA think they are doing a good job in respect of “helping investors to make well informed decisions”.

“In addition to feedback from those we regulate, this review was also informed by the IMF assessment and Deloitte’s evaluation of our effectiveness and efficiency.”

Where the hell is the investor in all this?? Why is the FMA not informed by investors? Who are they there for? Perhaps if you don't ask those you are there to protect from dodgy FSPs' behaviour then you won't get the information that would upset your current paymasters or future employers.

In a proper regulatory environment the FMA board would have a significant representation of investors' interests rather than overrepresentation of the people they need to be protected from. Then we might have an FMA management that focuses its energy on putting investors' interests first.

A little strident, but not unfair Brent. Sadly many, and perhaps all regulators suffer from provider capture over time. The CFFC has had more time.
Investors and Advisors have bee & remain under-represented in the FMA's governance. Unsurprisingly, it shows in the FMA's behaviour & focus.

Ominous soundbite in there for Insurance advisors. Here comes maximum upfront commissions legislated under the guise of reduced premiums.