Financial Markets Authority censures deVere New Zealand for breaching licence obligations

Financial services firm deVere provides advice on insurance, investments, and retirement planning, including KiwiSaver and UK pension transfers. Photo / NZME

The Financial Markets Authority (FMA) has censured Auckland-based financial services firm deVere New Zealand for breaching its licence obligations.

The FMA took action against deVere – which provides advice on insurance, investments, and retirement planning, including KiwiSaver and United Kingdom pension transfers – after a complaint about the firm’s conduct.

A review of deVere’s client files found the firm:

• Had inadequate record keeping in relation to advice given to its clients.
• Was unable to demonstrate that the recommendations made to clients were suitable.
• Failed to ensure its clients understood the financial advice they received and any limitations of the advice.
• Inappropriately limited the nature and scope of its advice and failed to clearly articulate those limitations to its clients.
• Failed to exercise adequate care, diligence, and skill in providing advice to its clients.

The FMA found deVere’s advisers failed to adequately consider the client’s investing experience and financial product knowledge, their risk profile in their advice on pension transfers, and the investments they recommended to the client despite some of the advised investment products being complex in nature and higher risk.

This included considering the suitability of the recommended products, including whether the customer was fully aware and understood the risks involved in these types of investment products. In some cases, the recommended products were higher in risk than the clients’ risk tolerance, the FMA said.

DeVere accepted there was an absence of proper records, including no records that the adviser discussed the advantages, disadvantages, risks, and benefits of switching from their clients’ current plan to the platform and portfolio recommended with their clients.

Peter Taylor, director specialist supervision and response at the FMA, said deVere’s conduct fell well short of expected standards.

“Financial Advice Providers (FAP) have a duty to comply with the standards of ethical behaviour, conduct and client care as set out in the code of conduct,” Taylor said.

“When advice relates to switching one pension product to another, we would expect an appropriate analysis and comparison to be performed considering the complexity of the product.

“In respect of the pension products deVere advised upon, these decisions made by customers are crucial to their retirement. Significant customer harm may occur if the advice is not suitable, and the adviser has not taken reasonable steps to ensure the customer understands the advice and the risks associated with it.”

While deVere has since taken significant steps to improve its compliance and to implement improved record-keeping practices, Taylor said the firm’s breaches warranted public censure.

“Censures hold firms to account while serving as an important reminder of their obligations to their customers. I encourage all FAPs to take note of this censure and the FMA’s expectations that they meet the standards required,” Taylor said.

DeVere must submit an action plan to the FMA outlining the steps it will take, and by when, to remedy the breaches and ensure it does not breach its obligations in future, the FMA said.