Advisers fail to measure up

By Mark Fryer

Financial advisers have – once again – come under fire from the Consumers' Institute.

The latest issue of Consumer magazine repeats a study of advisers carried out last year, with dismal results.

While advisers may be highly-trained and have all sorts of market information and computer software at their disposal, says the magazine, "…most of them don't seem to be able to do their job very well."

The carry out the test, Consumer sent a dummy customer to 14 Auckland advisers, from specialist financial advice companies, banks, insurance companies, a sharebroker and a major accounting firm.

The customer, "Linda", had fairly straightforward requirements; she was expecting an $85,000 windfall and wanted to know how to invest it.

As Consumer says, there was no one perfect answer to what its researcher needed, but there were some elements that should have been in any suggested investment – flexibility, long-term growth, some overseas investments and so on. However, only four of the 14 came up with a plan that satisfied those criteria.

Unfortunately, many advisers failed even before that stage.

Only half complied with the law which requires them to disclose certain information. Five of the 14 did not even raise the idea of Linda paying off her mortgage before investing, and only six asked whether she and her husband had enough life insurance.

Some failed to put their advice in writing or to explain their fees, which varied wildly, to a maximum of $3750.

Spicers Portfolio Management was Consumer's pick as best adviser in the survey.

Consumer says it is "astonished to find things have hardly improved" since last year.