Aurora pinged for misleading clients

Auroa Financial Group has been censured by the Financial Markets Authority for misleading KiwiSaver clients.

Wednesday, May 10th 2023, 11:05AM 5 Comments

The regulator says the group mislead existing and potential clients about KiwiSaver returns. It says the group "materially contravened two market services licensee obligations".
Aurora Financial – a financial advice provider – recommended Aurora KiwiSaver Scheme funds o clients or prospective clients during one-on-one advice sessions between September 2021 and May 2022. The Aurora funds did not launch until after the scheme was registered by the FMA in July 2021.

During the client sessions and in statements of advice, one-year and annualised returns figures were presented in connection with the Aurora funds. The figures were based on the historical returns of the underlying, third-party funds into which the Aurora funds would be invested, once the Aurora funds launched. The returns figures implied that the Aurora funds had an established history which they did not.

Fine print below the returns figures was not sufficiently clear, or prominent, for clients to understand the returns presented had not been achieved by the Aurora funds, but by the underlying funds. Additionally, Aurora Financial did not update, or replace, the returns figures with the actual returns produced by the Aurora funds once they had launched and short-term return data was available.

Aurora Financial stopped using the returns figures in May 2022.

The Aurora funds’ actual returns for September 2021 to May 2022 were achieved in different market conditions, and were lower than the historical returns presented by Aurora Financial. This gave clients the impression the Aurora funds were delivering higher returns than they actually were. In the period the returns figures were used, 2474 Aurora Financial clients joined the Aurora funds of the 4051 who received the advice.

The FMA is satisfied that Aurora Financial’s conduct was misleading or likely to mislead, and resulted in it making false or misleading representations.

“Investors and advice clients should expect to receive accurate and clear information to help make informed decisions about their financial products," FMA executive director - enforcement and response, Paul Gregory said.
"This is especially the case where potential clients are being asked to make decisions to acquire a product. Aurora Financial’s misleading conduct and representations in statements of advice, presented to clients by their advisers are a breach of trust and could erode the public’s confidence in financial advice providers.”

Tags: Aurora Financial

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Comments from our readers

On 10 May 2023 at 11:46 am Pragmatic said:

Amateur error

On 10 May 2023 at 10:01 pm John Milner said:

Ouch, wouldn’t want to be on that board of directors. Might want to check your governance process.

On 12 May 2023 at 10:12 am Rachelle Bland said:

Have I missed something? According to this article, Aurora made false/misleading statements to over 4,000 people, and 2,474 people acted on those statements and invested funds in their scheme, but there is no mention of any consequences for breaches of two FAP licensing conditions.

Surely they should be required to advise the affected people, apologise and make good for the affected clients.

Agree with @Pragmatic that this is an amateur error, but the FMA's response is woeful. What's to stop another FAP doing something similar? How does this 'no consequences' outcome improve or even maintain the public's confidence in FAPs?

On 12 May 2023 at 9:38 pm JPHale said:

@Rachelle agree, and good to have someone else notice that there is a pretty light touch on the provisions the FMA has largely driven in the rule book.

The license and disclosure conditions aspect is the minimum expectation around this.

And TBH once they get going it's likely that many will have these aspects noted for disclosure. The possible question on the light touch; is the FMA setting a bar of seriousness around this driving this not being tackled?

Not suggesting this wasn't serious enough, just a thought.

On 15 May 2023 at 4:40 pm smitty said:

Cheeky question but has anyone done the math on 4,000 engagements with people, I'm assuming some sort of replacement advice, over a period of 9 months. Which also includes Dec/Jan when people navel gaze and don't tend to do anything. Would love to see their documentation... Pretty massive engagement numbers, sounds like something you can do by door knocking or cold calling? Certain board members might be questioning why they decided to lend their illustrious names to this venture.

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