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Monday 16th of August 2010

Family trusts look like coming in for more scrutiny from the government according to NZ Trustees Services director Johnathan Cron.

He says there are real problems around the administration of trusts particularly with record keeping. Poor record keeping could see some trustees end facing legal action.

Cron also says there is an issue around whether or not trusts are serving the purpose they were established for.

Currently the government is looking at issues around family trusts and he expects there to be changes. Cron has written a comprehensive guide to family trusts. You can find out more about it at Good Returns' bookshop www.intelligentinvestor.co.nz

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Latest Comments
FMA wants clearer fees
@first time caller - I can see the complexity you highlight, but as above, investors should be able to see what they are paying without having to reference multiple documents. Investment admin can track and report deductions for tax, withdrawals, fees et al, would be /should be straightforward to aggregate advice fees into costs at member level... at least I hope so.
19 hours ago Goldcard
FMA wants clearer fees
@goldcard - how would you propose that a fund manager calculates the TER to include adviser fees given not all clients pay them and different advisers charge different fees, not to mention some advisors charge different fees to different clients? The advice fee gets disclosed in the adviser's disclosure statement and the statement of advice, so the client can add that to the published TER of the fund they are invested in to see how much they are paying overall.
1 day ago First time caller
FMA wants clearer fees
Schedule 4 of the FMCA regs 2014, particularly clauses 2(1) and 53(3) provide the basis for excluding individually charged advice fees from the statutory TER. This was introduced with the best of intentions, but now it is little more than an invisibility cloak for deductions from member accounts.
1 day ago Goldcard
Ideas for reforming KiwiSaver
@Ross The evidence is pretty clear on that. When advisers work in the best interests of their customers, as opposed to putting their customers into the products that pay them the most, outcomes are improved. (Makes sense doesn't it? Financial advisers go from sales people for fund companies to client fiduciaries.) It might reduce access, but does someone with $50K in a KiwiSaver really need investment 'advice'? A risk profile questionnaire or similar is a much better way to help consumers get into the right fund, i.e. move from a Balanced Fund to a Growth Fund. Why have more developed investment markets, e.g. US, UK, Canada, Aus, Netherlands etc. have banned adviser commissions from fund providers? I'd also add that there is a large group of KiwiSaver customers that are paying someone an advice fee without getting anything beyond a cursory email once a year in exchange. As @Paul says, it's 'easy money' for advisers...
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Aside from other questions I have on the inheritance/trustee case, what was the trustee company 'guilty' of to make them liable for the loss? Was it negligence, breach of contract (presumably not), was the trust in breach of its fiduciary duty? Where is the evidence? What is the justification? My understanding is Trusts and Trustees must act prudently and soberly in protecting a beneficiary's interests and does not extend to taking undue investment risk. How can 'advice' or investment decision be condemned simply on the outcome and with the benefit of hindsight? The benefit of hindsight can never be the determining factor in liability for inherently uncertain and unforeseeable outcomes, such as investment returns. If the trustee company had put her money in a growth fund and that had suffered losses over the period compared to a balanced or conservative fund, I have no doubt the trustee company would have been found to have taken too much risk and would again be making good the 'losses'. This cannot be fair, reasonable or just, it condemns advisers to being 'damned if they do and damned if they don't'.
5 days ago Steve Wright