Inside Money: Consumer backing the big end of town

Is Consumer backing the big end of town in the debate over financial advisor legislation? Photo / Colin Taylor

At a recent conference I witnessed a rare moment of solidarity between a representative of Consumer and a roomful of financial advisers.

Susan Guthrie, Consumer financial expert, almost earned a standing ovation from what should have been a hostile audience after a speech outlining her concerns about proposed changes to financial adviser legislation.

Guthrie is rightly worried that the amendments under consideration would hand more power to large financial institutions at the expense of smaller, independent advisory firms.

Her comments were a welcome sign that Consumer is beginning to engage with the subtleties of the financial advisory business. But this new approach hasn't extended to Consumer editor David Naulls who, in a recent editorial, reiterating the call for a ban on commissions included this extraordinarily naive statement:

"AMP had already signalled that it was abolishing commissions. It appears that the big players have decided that enough damage has been done to the investment industry by poor and non-independent financial advice. If governments weren't going to act, then the industry would."

If anything, the fact that institutions such as AMP now appear so enthusiastic to dump commissions should give Consumer cause to reconsider its position. These are the same 'big players' who designed and built the commission system - they're not dismantling it out of a sense of civic duty.

It's precisely because governments were going to act that the big industry players got in first, recognising they had to channel this anti-commission trend to their advantage.

AMP Financial Services, for instance, which is headed in New Zealand by Australian Jack Regan, stands to benefit significantly from new rules that push previously independent advisers towards institutions.

Regan, a seasoned campaigner in Australia's financial planning market, knows very well the value that controlled distribution can deliver to its institutional masters.

AMP, and every other institution that can seize the opportunity to bulk up their advisory forces, will make sure they clip consumers every step along what is often called the financial services 'value chain'.

And that, by definition, will result in a market dominated by the 'non-independent financial advice' that Consumer rails against.

Consumer is absolutely right to be interested in, and critical of, the financial services industry but we should expect more depth of understanding than it has shown to date - with the exception of Guthrie.

For example, Consumer's famous financial advice 'mystery shopper' survey has had its weaknesses exposed by a new study released this week.

True, the report was commissioned by two financial advisory firms stung by the original Consumer survey, but its author Michael Mintrom, director of the firm Research and Policy Solutions as well as an associate professor at the University of Auckland, swears the findings reflect his "independent views".



David Chaplin