Regulating Financial Advisers - The Good News

Before 1 July 2011,  anyone could call themselves a financial adviser.   New Zealand's main regulator of the industry, the Financial Markets Authority (FMA) didn't know how many financial advisers there were or what exactly they did.  You could call yourself a financial adviser but actually run a cheese shop!

In fact...there's a Monty Python sketch called "Cheese Shop" where the man behind the counter eventually admits, after a painfully long time, that his shop doesn't actually sell any cheese.   

This is how the NZ version plays out in 2013:

FMA - "Are you a financial adviser?"
Financial Adviser - (brightly) "Yes!  How can I help you?"
FMA - "Do you give advice on...budgeting?"
Financial Adviser - "Er...no, not really." 
FMA - "Do you help people manage debt?"
Financial Adviser - "No...not a lot of call for it around here."
FMA -"Do you give advice on...KiwiSaver?"
Financial Adviser - "Sadly not...not a great deal of money in it, see."   
FMA - "What about tax planning?"
Financial Adviser - "Not...as...such."
FMA - "How about investments?"
Financial Adviser - "Not so much these days, no."
FMA - "Shares?...foreign exchange?...bonds?"
Financial Adviser - (shakes head silently at each) 
FMA - "Mortgages?"
Financial Adviser - "Again, not me as such...but I do know someone."
FMA -  (a long pause) "Oh. (clicks fingers) Of course! Insurance?"
Financial Adviser - (relieved) "Yes!  Yes! Insurance, yes!"
(they both laugh)
FMA - "Good! Car insurance?"
Financial Adviser - "No!  Not car insurance!" (snorts)
FMA - "House and Contents insurance?"
Financial Adviser - "No!  Well, not  me personally...but I can refer you."
FMA - (really struggling now)"... erm....Life Insurance?"
Financial Adviser - "Bingo!  Good morning, how can I help you?"

So this financial adviser only sells life insurance policies.      Most people need life insurance and having a trusted expert to help them is necessary.   There is nothing wrong with that.

A few years ago, before the regulations, the man behind the counter could have legally said "yes" to any of those questions and earned commission from providers.   That isn't true now.    


So that's good news.   These days, a financial adviser is far more upfront about what they do.   And usually they will tell you straight away without the (Spanish) inquisition.