KEY POINTS:
Suzanne Edmonds is the first to acknowledge that she used up her 15 minutes of fame a very, very long time ago.
Back in the late 80s, the feisty campaigner became the public face of disgruntled investors swindled out of millions of dollars by a rogue agent for global tax advisory business H&R Block.
She still has the videos of her television appearances alongside prominent politicians at the time. "I was 30-ish and I was bulletproof at that stage," she laughs.
After three years of bureaucratic battles, Edmonds finally managed to extract a cheque for $1.3 million from Henry Block himself. The agent went to jail. It made her famous in her hometown of Tauranga.
Nearly two decades on, Edmonds has moved to Auckland and, at the age of 51, no longer feels quite so invincible - although her cellphone still answers to the perky tunes of Cyndi Lauper's Girls Just Want To Have Fun.
She has been a housewife, dentistry assistant, manager for Jenny Craig and head of the Tauranga branch of Age Concern. In 1990, she was a candidate for New Zealand First.
Through it all, she has continued to help people who have come to her with their financial problems. In the late 90s, she helped form the Bank Customer Action Collective to fight a dispute with the BNZ. And, for the past few years, she has been battling investment giant AMP on behalf of Wellington man Jim McSoriley, who claims an AMP agent lost all his money on a financial product that was unsuitable for his circumstances.
In early 2006, she sat across the desk from Bridgecorp boss Rod Petrecevic and asked him to explain why people like Kapiti Coast sharebroker Chris Lee had such a low opinion of the finance company. Petricevic's response was so vitriolic, she can't bring herself to repeat the words he used.
Through the AMP case, she discovered dozens of other people in the same situation and, last year, she and McSoriley set up a lobby group, Exposing Unacceptable Financial Advice (Eufa). Its website went live at about the same time Bridgecorp collapsed. Unsurprisingly, she has been dragged into the Blue Chip debacle as well.
A series of family dramas have forced Edmonds to postpone a planned Eufa roadshow to the South Island this month, and she doesn't mind admitting a particularly hostile lawyer she recently encountered managed to reduce her to tears.
But she is absolutely clear that her own personal hiccups are insignificant compared to the hundreds of tales of woe she has patiently listened to during the past 18 months. She has spoken to people who have been suicidal, and has lost count of those who have simply sobbed into their telephones.
While it is not yet known how much money investors have lost in finance company collapses, and may not be known for years as the receivership processes grind on, it could be hundreds of millions of dollars.
"I do have huge concerns for the suffering. I'm good at what I do and I'm not into the personal agendas and so on that people squabble over. I've listened to older men in their 80s beside themselves on the telephone because they consider they've been cheated by their adviser, or by Bridgecorp, and they haven't got the money they were relying on. It was their hard-earned money. That is my passion.
"I get a lot of criticism and, today, I got some that prompted a few tears but what drives me is those people who really do suffer. I've heard some awful stories, and they've changed my life, in the way I think and the way I behave. These people - they fought for our country. And if they didn't, their parents did. We are flying in the face of them and how dare we."
Edmonds is well aware that in financial and legal circles, she is dismissed as a lightweight. It doesn't help, she chuckles, that she looks a little "mumsie". And that she openly admits she is no financial expert. But those who accuse her of trying to make money out of other people's misery couldn't be more wrong, she insists.
She started charging for her services when the costs and the demands on her time started to get out of hand.
"Lots of people used to get me to help them with their problems, and I did, and then we decided to set up a little business. At one stage, I had three negotiations before January 1. I thought, 'This is ridiculous'. I did it all for free, and it cost us money for calls."
She has had many meetings with Commerce Commission staff and has also met the Australian Securities and Investment Commission (ASIC). It's the same story wherever you go, she says. "They say they'd love to help but don't have the resources."
Needless to say, she is delighted that after years of excruciatingly slow examination of the sector, New Zealand's bureaucrats and politicians are finally catching up with the rest of the developed world in trying to rid our financial waters of some of the sharks.
Law changes which come into effect today will require all financial advisers to give clients a disclosure statement before giving any advice or taking any investment money. The statement must give specific information about the adviser, the products they give advice on, and how they get paid. Those caught breaking the new laws can be fined up to $300,000 and banned for up to 10 years.
And more is on its way. Under a bill sent to a parliamentary select committee last week, financial advisers will be required to join an approved professional body, overseen by the Securities Commission. Any person who is bankrupt, or has been convicted of certain crimes, will not be permitted to provide financial advice. Advisers will also be required to disclose any conflicts of interest and their fees, and to demonstrate minimum competency standards.
The catch is that all of this is unlikely to come into force until 2012, to give the industry time to adjust. In the meantime, those who have been ripped off by shonky advisers and businesses are wondering when they will ever see some accountability - or get back some of their money.
"Our concern is that while the future is looking bright - that's for sure - the Government has an obligation to the people on the basis that the people have not had the protection that the Government has for so long promised," says Edmonds. "And that's a big can of worms."
For example, New Zealand lags behind the rest of the world when it comes to recovering money laundered overseas or into trusts, she says.
"Australia is a very good country when it comes to legislation around that kind of thing and yet we don't seem to want to follow suit in that area. We shouldn't be legislating ambulance-at-the-bottom-of the-cliff stuff. How many people do we get told of in a week that have been to the Commerce Commission, but the commission says, 'We haven't got time to investigate it'?
"That is essentially the same as a burglar coming in and burgling my house and the police saying they don't have enough staff, so I just have to claim on my insurance. That burglar will go on and become an armed robber, and it just goes on and on. Why are we seeing it any different in the white-collar area?"
One of Edmonds' main beefs with the financial advice industry is that they are often selling their own firm's products. This makes them salespeople, not independent advisers, she contends.
It's an argument with which veteran Australian financial journalist Alan Kohler agrees wholeheartedly.
Last week, Kohler addressed ASIC's annual Summer School, and used the occasion to slam the idea that disclosure would help rid the industry of shonky practices.
The problem, he argued, is that most people don't have the education to understand what is being disclosed or simply can't be bothered wading through the pages of fine print.
"I said the same thing at the ASIC Summer School of 2006 and nothing has changed since," he wrote the next day in a column for his respected website, Business Spectator.
Kohler admits financial advice can be important. But many people, he argues, should simply put their money into a cheap super fund and get on with their lives.
All too often, he complains, advice is a fig leaf for the retail financial services industry's sales effort. Not that there's anything wrong with sales. "What's wrong is dressing up sales as advice and then browbeating regulators with the apparently unarguable assertion that advice is necessary."
As for managed funds, managers don't exactly have a stellar record of achieving better returns than passive investments, once fees and taxes are taken out of the equation, he notes.
Recent tax changes in New Zealand have improved that situation. But according to Kohler, an Australian with $1 million to invest is still likely to be charged about $2000 per month by an adviser. That makes financial services pretty costly, he says.
"For many people it is more expensive than power, gas, phones and water put together. And, at least with the other utilities, we get something useful; with financial services - the most expensive of all utilities - we basically get packaged access to the market. We would be fine without it."
Kohler's answer is to separate advice from sales. Advisers should be fiduciaries, like lawyers, he suggests. They should charge by the hour or, where appropriate, have long-term retainers.
"But the current situation [in Australia] is that anyone who goes to a financial adviser, even for a single piece of advice, must enter a comprehensive long-term annual fee-paying relationship because that is what the regulations require, along with hundreds of pages of disclosure of everything."
In New Zealand, the industry has been debating a move to fees rather than commissions for some time.
Rotorua-based publisher Phil Macalister, who specialises in the investment industry, believes KiwiSaver has been useful in helping advisers understand the fee-charging model.
"There's a bigger group of advisers than I would have expected who have basically adopted KiwiSaver and going down the fee route, and that has to be good for the industry. That's actually more likely to clean it up than any bills going through Parliament."
In fact, the New Zealand advisory industry is much different to Australia, and probably much less shonky, he believes, despite the fact that our regulators seem far slower to act and have much blunter teeth.
In New Zealand, clients tend to favour a more holistic approach. "They've got a certain amount of money and they want a certain outcome. In Australia, they go to advisers because of the complexity of the tax laws."
However, it's unrealistic to expect regulation to solve our problems, says Macalister. "My line on that is: 'You can license dogs, but they're still going to go and bite people'."
Financial advisory group Plan B has been charging fees for years. The group, which used to be known as Strategic Asset Management, pays its advisers salaries, with bonuses according to the size of their clients' funds.
Michael Pipe, technical manager for Plan B, notes that fees are becoming increasingly popular in many industries, including travel and real estate. And while the collapse of real estate firm The Joneses has highlighted the inherent flaws in fees, Pipe says Plan B's staff wouldn't have it any other way.
"A lot of it is just making certain that you go and charge a fee which does compensate you for the time you're putting in, in the same way that lawyers and accountants charge on a fee-only basis - and I don't see them pleading poverty."
Plan B, along with many others in the industry, is delighted that legislation is finally within sight, having argued for it for years, says Pipe. However, he is under no illusion that the changes being proposed will make a huge difference and, like some others in the industry, would like to see more safeguards introduced. He would like more firms to seek certification from the United States-based Centre for Fiduciary Excellence, for example.
Cefex, as it is known, is a globally recognised assessment and certification organisation for the investment management industry, which checks everything from where the money goes, to what mentoring systems are in place, to the adequacy of research.
"The problem is that it is that easy to become an investment adviser at the moment, that you don't know about the quality, and there is no way you can go and check a lot of these advisers without having another body in there. If you get a disclosure statement and it comes in at eight pages, how many investors are going to sit there and read those eight pages and understand those eight pages?"
That said, Pipe believes that some of the horror stories that have emerged have given the impression that incompetent advisers are more widespread than is probably the case.
"There are some situations where people have been getting bad advice. There are a lot of cowboys out there, that much is known. But is it as bad as one in every three people? I suspect that would be a massive overstatement."
According to some, one good thing regulation did in Australia was drive a lot of people out of the industry. Last March, Vestar founder Kelvin Syms was quoted as saying that new rules governing financial advisers in Australia prompted a 14 per cent retirement rate. A similar figure, he suggested, could be expected here.
Ironically, Syms himself has since come under fire, after selling his chain, which used to be known as Northplan, to Australian investment company MFS for $52 million just before Bridgecorp collapsed. Northplan was one of Bridgecorp's biggest supporters.
The company has since promised clients caught by the similar collapse of Capital + Merchant that they will not "suffer any capital loss". But given MFS' own financial problems, which have resulted in it being suspended from the stock exchange, many remain doubtful that such promises will prove to be more than hot air.
In the meantime, it remains to be seen whether the advisers can get their act together and establish a single professional body.
At present, the Institute of Financial Advisers claims to be the largest such organisation, with a membership of between 1200 and 1400, depending on who you believe. But even it admits it has failed to attract more than a fifth of those working in the industry.
Through his website www.goodreturns.org.nz, Macalister has criticised the IFA for doing a poor job of promoting and defending the industry.
According to Macalister's reading of the association's accounts, membership must be falling, given that revenue has gone down, while subs have gone up. That's somewhat surprising, he argues, given the current focus on professionalism.
IFA chief executive David Hutton rubbishes the claim. The reason revenue has gone down is because it held its conference at a different time than usual, he says. For his part, Hutton prefers to blame the media for using "shock horror headlines to sell newspapers". Rather than attacking those he believes to be dragging down the industry, Hutton prefers to talk up his own members, who deserve credit, he insists, for striving for high standards.
Hutton is aggrieved that, in the wake of fiascos such as Bridgecorp and Blue Chip, financial advisers have been portrayed as "greedy, hungry people who put people into products that aren't suitable for them just so we can earn some income".
Yes, they do earn income but they do it in a way that should help their clients, he says. And yes, there are a few people out there who are not giving good advice.
"But if you look at the finance company side of things, you'll find that a high proportion of [investors] went into them without any advice at all. In fact, there is a major issue with the need to improve financial literacy. People like the Retirement Commission, working with others trying to develop improved education with financial literacy, is certainly something the IFA well and truly supports."
Hutton is aware of around 16 formal complaints so far relating to IFA members. Of those, two have been referred to the association's discipline committee, and the rest are still being scrutinised.
The problem for most investors is that there is no such process for non-IFA members. That will also change in 2012.
Hutton notes the industry is still a relatively young one. It is, after all, really only in the last 20 years that a sufficient variety of investment products has been available to make advice worthwhile. Prior to that, life insurance was about the only option to save for retirement.
In the old days, life insurance companies did a good job of training their staff, he says, but that fell by the wayside once agents became independent. It was only 10 years ago that the two sides of the industry decided to merge and form the IFA.
"There are now formal courses that people can do, but they're comparatively recent. The ones that are there have really been established because we encouraged organisations to set them up. We've been leading the industry, but because we're so small, it's a really hard thing to do to grow it from nothing."
What about the argument that successful advisers owe it to their clients to spend at least some of their profits on independent research, so they don't get duped by smooth-talking finance company reps?
Some of the big firms do indeed do that, says Hutton. It is also one of the reasons why franchising has become so popular, so the costs of research can be shared. "But it's really difficult doing research," he argues.
One area where he and Macalister agree is that people need to take some responsibility for their own financial affairs. At the very least, they need to understand the relationship between risk and reward, and why diversification is so important.
"The poor old advisers are the suckers in the middle to some degree," says Macalister. "I think there's a huge amount of responsibility that rests back on the product providers, and the Government and the regulators."
Edmonds agrees that it's unfair to load all the blame on those caught in the middle, when the real villains are the businessmen who ran the finance and property companies that have since turned to rubble. It is sickening, she says, to see people like Bridgecorp's Rod Petricevic and Blue Chip's Bob Bangerter driving around in expensive cars, while their distraught customers can barely afford to pay for petrol.
But she remains exasperated by those who also point the finger at investors.
People go along to doctors, and pay for their expertise, because they recognise the shortcomings in their own medical knowledge, she notes. You don't see doctors blaming patients for being ignorant - to their faces, anyway.
The whole point of financial planners (she prefers the more generic term), like doctors, should be to provide some safeguards in the system, she says.
"Those people that have lost money, they are patriotic people. They're you and me. They're not special people living in an ivory tower. They're people who are the salt of the earth and they are the people who make this country tick. They're the people that pay the taxes.
"Who do the politicians, whichever party they are in, think they are, when they don't put in the effort to sort this out and they're busy worrying about graffiti? I look at graffiti every day outside my window. It's nothing like the suffering of these people who have lost all their money."
She recently spoke to a retired farmer, who has lost his entire nest egg because of bad investments. He had no idea what to do with all his money, so he went to his accountant for advice, who he had known almost his entire life. "He totally trusted him. And now his life is ruined."
* Tightening the law - slowly
Under current law, anyone can call themselves a financial adviser. You don't need any qualifications. You don't need any supervision. You don't have to belong to a professional body. You don't have to have a formal way of dealing with disputes. And until today, unless asked a specific question, you didn't have to disclose anything other than certain criminal convictions, bankruptcy and banning orders.
From today, amendments to the Securities Markets Act 1988 change the rules on disclosure by investment advisers (but not other kinds of financial advisers).
From now on, before they give you investment advice, an adviser will have to tell you in writing (whether you ask them or not) about their:
* Experience and qualifications.
* Criminal convictions and adverse findings in any court on their professional role.
* The nature and level of any fees charged.
* Details of remuneration or rewards they have received or will receive from anyone else.
* Other interests and relationships that could affect the advice.
* Types of securities they advise on.
Wider changes to the law won't come fully into effect until 2012. That proposed new law would apply to anyone who gives advice or guidance about financial products or decisions to the public for a living. This could cover a very large group of individuals and firms, and not only those who give investment, savings and insurance advice - it could also cover advice on bank accounts, mortgages and other loans, general insurance, estate planning, tax and real estate investment.
The main reason for the delay is that the law would require financial advisers to belong to an "Approved Professional Body", which would set and enforce minimum standards for competence, education, conduct, ethics, and have complaints and discipline processes.
This would include an ombudsman-type scheme with ability to demand compensation.
The delay is to enable professional bodies to form, be approved and then give advisers time to meet their requirements to join.
The Institute of Financial Advisers represents about three-quarters of advisers who belong to any body. The institute already requires members to disclose remuneration and conflicts, submit to independent complaints and disciplinary processes, and follow a code of ethics and practice that among other things require them to:
* Act in the interests of clients (this is a higher standard than expected in the new law, which will require advisers only to "act with integrity").
* Act only where they are competent.
* Undertake an average of 30 hours a year of ongoing education.
* Ensure that their advice has a reasonable basis.
* Ensure that their remuneration is fair and reasonable.
* Have professional indemnity insurance cover for the protection of clients.
(Information supplied by the Institute of Financial Advisers. For more info, see www.ifa.org.nz)
