Financial advice problems being addressed, says Govt

Commerce Minister Simon Power.

Changes the Government is making will improve the standard of the financial advice industry, Commerce Minister Simon Power says.

A Consumer NZ investigation of financial advisers found the advice being given was "scandalously poor".

Consumer NZ chief executive Sue Chetwin said only three out of 17 advisers produced plans that were rated "good" by the expert panel. The remaining 14 were rated as "disappointing" or were "rejected".

Problems found included poor analysis, unclear costs, advisers portraying themselves as independent when they were not, high costs and bad products.

Power said the work had highlighted serious deficiencies in the sector.

"But I'm confident the new financial regime the Government is implementing under the Financial Advisers Act 2008 will go a considerable distance towards addressing the shortcomings in the industry."

The Government is currently implementing various aspects of the Financial Advisers Act 2008 with a view to having the regime fully in force by December 2010.

Power said Consumer's findings around disclosure, competency, and independence were concerns that had been raised with him.

"The new regime will improve the standard of disclosure currently made by advisers and will ensure that more meaningful information is provided to consumers.

"Those improved standards of disclosure will ensure consumers are better placed to assess the extent of their adviser's independence."

The regime would also require advisers to meet minimum standards of competency.

While the changes would have an impact the industry needed to be the driver.

"Without an industry that is willing to reform itself, any government intervention will only be partly effective.

Consumer NZ conducted its research by sending mystery shoppers to 33 financial advisers, from large institutions with in-house advisers and agents, sharebrokers and nationwide adviser chains to small stand-alone firms.

An expert panel assessed the quality of advice and information in the 17 plans it received.

Chetwin said the industry was in serious need of reform, with current proposals "too little, too late".

"We're concerned that skill levels are low and will remain low, unless competency standards are included as part of the adviser authorisation process due to come into force next year."

NZPA