@Murray: The reps seemed to be acting on their personal interests rather than the interests of advisers. Conflict of interest, isn't it?

In this recent presentation of mine https://www.knowrisk.co.nz I show that the average Balanced KiwiSaver fund has added approximately +0.43% over and above the gross average policy Benchmark's return's. However, the averge annual costs of -0.97% for Balanced funds have eroded that to be slighly below BMK after costs consistent with typical SPIVA studies. Note this cost number is for the 45 Balanced Funds used only - for all KiwiSaver Funds it is closer to -0.70% p.a. The presentation goes on to show that quite a bit of return is being left on the table by the one size fits all view of risk.

@pragmatic The most elegant description of what you are talking about was retired Chief Justice of Australia speaking at a conference in Australia in 2009. Sir Anthony Mason said "our system of regulation proceeds on the footing that the adviser may be a product seller. Indeed our system enables the product seller to adopt the guise of a financial adviser and endows that disguise with the aura of legitimacy by calling him a "licensed financial adviser. The sales vs advice distinction was lost a long time ago. I believe the final straw happened at an industry/professional association meeting with MBIE where I was arguing very strongly for such a divide - those who were there might recall my Venn diagram. But I got completely white anted by the PIA rep, and the FPIA reps were so tied up in their wish to appease the officials in the hope they would meke them the self reluator that they chose not to engage in the inter-association stoush. My subsequent discussion with a senior MBIE person told me we lost the sales vs advice argument that day because of an advisor body representative exhortations.

Great article, Kat. The problem is that none of this feels real to people until it is. I'm as guilty as anyone. Death is at least a concept everyone has sat with. Surviving and never earning the same way again is abstract enough that it gets traded away first when the premium needs cutting. For us, TPD riders on trauma, mortgage and income cover are an opt-out, in as standard on every recommendation, and standalone TPD is discussed separately on its own merits. Nobody should be leaving without some form of long term disability protection if we're looking at someone's bigger picture. Granted that premiums will usually be the reason for opting out.

There is real heat in the criticism aimed at the regulator, but it is pointed at the wrong target. The serious charge is not that the FMA's house is untidy — as noted by @Amused, it is that industry people who sell have been allowed to present themselves as people who advise. Since March 2021 "financial adviser" has been a legal designation, not a job title, carrying a duty to give priority to the client's interests. Yet the word has escaped its definition, with a salesperson tied to a single manufacturer dressed in the language of advice. The subtler case is the practitioner tied to a single investment philosophy, for whom every client in every circumstance somehow arrives at the same answer — a conflict that is intellectual rather than commercial, and so triggers no disclosure at all. The regime's answer is disclosure, which assumes a first-time buyer of advice — anxious, deferential, slightly embarrassed at how little they understand — will read and understand a scope-of-advice statement like a compliance lawyer. Consumers hear "adviser", they hear "your interests come first", and they conclude a market was searched. So the question is not "was this disclosed?" but what did the consumer reasonably understand to have happened? A conflict is not managed because it was mentioned; it is managed when the person bearing the risk knows they are bearing it.