In a move sending a clear message to the industry, an AFA has been warned after offering bulk KiwiSaver advice to clients.

Roger Gannon, an AFA at Gannon Insurance Brokers, sent a bulk email to his clients in March 2020. He recommended they immediately move their savings in KiwiSaver plans and similar investment funds to “low risk” funds in the wake of market uncertainty caused by Covid.

The FMA was alerted to the communication after receiving a complaint from one of Gannon’s clients.

In May 2020 the regulator issued a formal warning sending a message to Gannon and the industry of its expectations around suitable advice for market conditions. Gannon was not named at this point. 

The FMA made inquiries into Gannon in the following months and discovered further concerns with his advice process. The FMA determined that a public warning was most appropriate in the circumstances, recognising that Gannon cooperated fully with the FMA throughout its inquiries.

Following its investigation, the FMA was satisfied that Gannon contravened the Financial Advisers Act 2008, in particular:

• section 22 by failing to meet disclosure requirements
• section 33 by failing to exercise care, diligence, and skill that a reasonable financial adviser would exercise in similar circumstances.

James Greig, FMA director of supervision, said: “Mr Gannon’s advice was a knee-jerk reaction to market volatility at the time and failed to meet the standards expected for supporting his clients.”

Gannon told Good Returns that he believes a fair outcome has been reached.

“Not only is it fair but it has been good for both me and the business. I have taken a lot of steps to ensure that I am compliant now. All the recommendations and advice that I give now are top notch.”

In issuing its warning, the FMA took into account that Gannon has engaged an independent consultant to assist with carrying out a professional development plan, compliance training and a review of past advice and supplementing it where appropriate. All of which serve to mitigate the risk of potential future harm.

In reference to this Gannon said “In the last five years I have been audited twice by a company to make sure that my processes were good. Despite having gone through the processes, I have since found out that they were not. I have engaged one of the top compliance companies in the country and they have been very helpful. Before March 15 I know that I am 100% compliant.”

The independent consultant has agreed to report to the FMA on progress with this programme.

The FMA determined a public warning was the appropriate regulatory tool to enforce compliance and hold the adviser to account for the breaches of the Act.

There are no civil penalties associated with contraventions to sections 22 and 33 of the Act.