Investment advice 'scandalous'

A consumer watchdog says Government reforms of the finance industry are too little and too late after a mystery shopper investigation found most advice given to customers was "scandalously poor".

Consumer New Zealand sent mystery shoppers to gather advice on investment and pre-retirement plans. Out of 17 plans, an expert review panel failed all but three.

Major firms such as Westpac Bank, AMP, Money Managers and Rutherford Rede were among those whose plans the panel slammed.

The three plans that were rated as "good" were from First Capital NZ and Stuart and Carlyon, which provided investment plans, and Trustee Executors, which provided a pre-retirement plan.

Consumer NZ chief executive Sue Chetwin said the incompetence shown by advisers meant Government moves to reform the industry needed to begin immediately, instead of late next year.

"There was poor analysis, unclear costs, advisers portraying themselves as independent when they were not, high costs and bad products."

Ms Chetwin said commission payments were a reason advisers offered specific products, even if they did not fit the consumer.

She said Consumer NZ was calling for a ban on these incentives.

Shoppers looking for pre-retirement plans were often told to invest too much when they already had a large mortgage. For plans of little practical help, the mystery customers paid an average of $784.

Those seeking investment advice were rarely informed of the initial and ongoing costs of the advice.

The average cost of the mostly meaningless plans was $549.

The Government's Commissioner for Financial Advisers, Annabel Cotton, said the results were disappointing but not surprising given the light regulation of the industry.

An overhaul of the finance industry began in 2008.

Commerce Minister Simon Power said the new regime would begin to address the apparent shortcomings.

He added that the industry needed to be willing to reform itself, otherwise Government intervention would be only partially effective.

Panel member Jonathan Glass, a client adviser for Gareth Morgan Investments, said there were few signs that the industry was preparing itself for these reforms.

"Some of these advisers seem to be trying to make hay while the sun shines, certainly until the regulations come into play."

Even if Government change was a year away, firms could improve their disclosure immediately, he said.

"It could be done tomorrow. They should have to provide a disclosure document of one or two pages, standardised across the industry, which allows customers to compare apples with apples.

"It's not hard, but this industry makes it damn near impossible."