Bans across the water

Photo / Hawkes Bay Today.

Commissions paid to financial advisers are a perennial subject but maybe not for much longer.

As per expectations an Australian government report  released on Monday night had some tough recommendations for reforming the financial advisory industry.

One of which was the slight postponement of a ban on commissions. Bernie Ripoll, who led the Australian inquiry, told press there while he has asked government and industry to work on a way "by which to cease payments from product manufacturers to financial advisers", rather than seeking an immediate ban, its intention is clear enough.

"The word 'cease' means 'stop'. To me it is pretty clear what the word 'cease' means," Ripoll was quoted as saying.

Where Australia goes in this matter, New Zealand will follow. Trans-Tasman 'mutuality' is becoming an important regulatory mantra.

Even as I write, the Securities Commission and the now-infamous adviser 'Code Committee' are poring over the Ripoll report looking for inspiration, as they reformulate the rules for New Zealand's financial services business.

In his 150-odd page report  (read it if you dare), Ripoll eventually distilled 11 formal recommendations of which he claimed the most important was the introduction of a "fiduciary duty" for financial advisers. That translates as a requirement for advisers "to place their clients' interests ahead of their own" - absurd as it might seem, this has to be formalised.

Number 10, (which may, or may not indicate its relative importance) on Ripoll's list was also interesting. He called for another government investigation - Australians love them - into "the costs and benefits of different models of a statutory last resort compensation fund for investors".

This would keep the increasingly hysterical EUFA lobby group happy; it might even be a good idea but I suggest New Zealand wait until the Australians have finished their investigations and we can pinch their findings.


David Chaplin

 

Photo / Hawkes Bay Today.