Thursday 10th of July 2008

I’ve commented before about the tortuous process adviser regulation has gone through and now it appears to have gotten to the mad stage.Discussion on how the sector should be regulated has gone on for years. There have been task forces, discussion papers, U-turns – the lot. The road has been as windy as crossing the Southern Alps, rather than being straight, sharp and direct. It appears the government is pretty hell-bent on getting this through Parliament before the election. While there was some thought this would be a piece of legislation which lingers, the fact that the select committee hearing it sat on a Monday (very unusual) and reports officials are advancing plans behind the scene, a pre-election passing looks highly probable. That’s fine, but as we report today it appears there is a whole new model being promoted which hasn’t had much discussion in the industry, particularly by the people who will be regulated – advisers. Under this accredited institution model advisers would have to belong to a product provider who would be responsible for regulating advisers who sell its wares. I’m struggling to see the benefits for consumers with this model. It seems that institutions are making a land grab for distribution; that they could shield poor quality advisers from scrutiny; and that they risk brand damage if an adviser goes off the rails. I met someone yesterday who told a story about an adviser putting all of a couple’s retirement savings (around $150,000) into one finance company. Under this regulatory model that company could be the accredited institution, and one would question (especially if it was someone like Bridgecorp) what sort of investor protection there would be. This new development, is major for advisers. I would like to hear your views on it, how much if anything you know about it, whether there has been any consultation and what you think the regulatory model should look like. Use the comments box below to leave your thoughts or email them to thoughts@goodreturns.co.nz