A quarter of Kiwis worry that financial advisers would push products to reap fees, survey shows

Thursday 10th December 2015

A quarter of respondents in a survey of New Zealanders using the www.sorted.org.nz website said they were worried a financial adviser might try to sell them a product that wasn't right for them or they didn't need.

The survey by the Commission for Financial Capability (CFFC), an autonomous Crown entity, also found that a quarter of those polled didn't know how to find or choose a professional adviser. In a media release for the survey, the two bodies published a sample of comments from respondents including one who said of financial advisers: "I worry they can't be trusted and will give me tips that turn out to waste my savings."

Commerce Minister Paul Goldsmith has said a review of the law covering financial advisers is one of his top priorities for the coming year, although he wanted to take a "slow and deliberate process" as the area is "ripe with potential for unintended consequences." Last month, he released an options paper on ways to improve the seven year old law for consumers, saying there were anecdotes that the current regime was "overly complex and that this has reduced access to financial advice."

Goldsmith singled out rules around the disclosure of commission and potential conflicts of interest as being inconsistent, and that people "don't always know whether they are getting genuine advice or whether they are being sold a product."

But the Ministry of Business, Innovation, and Employment paper doesn't favour an outright ban or restriction on advisers getting backhanders such as commissions, trail-fees or sales target bonuses to promote some financial products ahead of others, preferring a stronger and simpler disclosure regime.

“We would like to see better transparency around some of the issues that have been raised about the way advisers are paid, bias to particular products or providers, and incentives to sell products," the CFFC's David Boyle said in the release. "It’s clear that investors have fears about the way some financial products are being sold and transparency will help to build up trust and lead to better outcomes for the public.”

Because the survey identified people from the www.sorted.org.nz website, it was based on a sample of those already trying to improve their financial circumstances. Still, of the 1,762 polled, 46 percent said they had never used a financial adviser, and of those that had, 74 percent hadn't paid for the advice. Only 16 percent said they were happy with their financial position, while 44 percent said they managed their finances on their own.

The CFFC and the Financial Markets Authority released the findings of a second survey, into how people over the age of 50 were preparing for retirement. It found six out of 10 had never spoken to a financial adviser. Reasons for seeking advice were after receiving an unexpected sum of money, cited by 62 percent, while being close to retirement age was a reason for seeking advice by just 21 percent of those polled.

Some 93 percent rated trust as the most important consideration when choosing an adviser and 84 percent said they were concerned "with how well the advisers disclosed any links between themselves and the products they recommended." Qualifications and experience, and customer service were ranked higher than costs or fees as reasons for choosing an adviser, although 70 percent of respondents said remuneration was still an important consideration.

BusinessDesk.co.nz

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