Unsolved financial advice mysteries

I've been through a few mystery shops before so no matter how hard Consumer tried to arouse my disgust at the financial advisory industry with the emotional introduction to its new report, I was not moved.

"Scandalously poor," screamed the headline, followed by the tabloid "... the results from our mystery shop shocked even us: this is an industry in serious need of reform".

Well, it's an industry in the midst of serious reform. Even as Consumer chief, Sue Chetwin, was expressing her concern that things won't improve "unless competency standards are included as part of the adviser authorisation process due to come into force next year", the industry was absorbing new proposals on competency standards.
Chetwin has already called the adviser regulation "too little, too late" and while its introduction has been painfully slow it's also too early to call them a failure.

Chetwin told me that the regulations should be implemented immediately and bolstered at the same time, which seems to me an idealistic vision, knowing the torturous consultation and counter-consultation path these events move upon.

Consumer organisations should be bolshie, though, and its adviser report has formed a valuable function in sparking debate about what financial advice is and how you pay for it - advisers are certainly engaging in a healthy debate.

But it is not an in-depth investigation of the industry. The sample size of only 17 plans is a few standard deviations short of statistical robustness and there are a few other bizarre aspects of the findings - for example, it seemed to be suggesting New Zealanders will continue to enjoy high returns from cash investments when the opposite is more likely.

Chetwin described the mystery shopper report as a "snapshot" of the advisory industry and that's what it is. What we really need is a feature-length movie in the detective genre.

David Chaplin

Pictured: Consumer Institute head Sue Chetwin. Photo / Herald on Sunday