Another blow has been struck on behalf of investors who lost their savings over the last two or so years thanks to the bum advice of financial advisers.
It won’t recover their lost savings, but it will give them the satisfaction (a scant one, maybe) of knowing future investors will be better protected.
The Securities Commission yesterday announced the beginning of consultation on skills required for financial advisers.
All people interested in the competency of financial advisers are invited to make submissions on the skills advisers will be required to have under a new law.
The Financial Advisers Act 2008, to be implemented by the end of 2010, is designed to lift the standards of professionalism and accountability of financial advisers, thereby giving investors greater confidence in the advice they receive.
The Securities Commission has today released a Staff Paper on Authorised Financial Adviser Competence. The paper outlines current developments and possible approaches to setting the standards of competence which will be required for advisers who are authorised under the new law.
The commission’s director of supervision, Angus Dale-Jones, urged financial advisers, their employers, investors, education providers and other interested parties to review the paper and make submissions to the commission.
“The competence of financial advisers is at the heart of the new Financial Advisers Act so it is critical that all people with an interest in the industry get involved now,” he says.
The skills and competencies required for financial advisers ultimately will be determined by the Commissioner for Financial Advisers and the Code Committee, which will involve further consultation.
The legislation giving rise to these developments was sparked by people losing their money after investing in high-risk companies based on the advice from people getting commissions from the companies involved.
The financial mess created by bad financial advice and by by shonky finance companeis was highlighted in Parliament by ACT MP John Boscowen during the General Debate on 11 March:
The Prime Minister was asked this afternoon about New Zealand superannuation, and he referred to the fact that $4.7 billion had been lost. But there is actually another loss, it is a very real loss, and it is a greater loss. It has been estimated that over the last 3 years some $6 billion has been lost by—or is now tied up in moratoriums on—finance companies.
This money has been lost mainly by savers, and particularly by elderly savers, and I think that it is an issue that should concern all parliamentarians from all sides of the House.
About 46 finance companies have now collapsed, and I think that a number of issues come out of that.
Boscowen said these collapses had a huge impact on the lives of their victims, who had worked their whole lives and raised their families, but in their 60s, 70s, 80s, and sometimes 90s, when they thought they had provided for their future and their retirement, “they have now found that some, most, or all of their funds have been taken from them.”
The issue arises as to the licensing of financial advisers, and I am aware that the previous Government introduced legislation that tightened up the regulations relating to financial advisers. We need to look at the quality of the advice that was given to those investors, those savers, and we need to look at the potential conflicts that are faced by financial advisers. We also need to look at the legal profession, to see whether people have been given bad advice, and to see whether money has been passed on to vendors of properties in excess of what would be normal.
Boscowen recalled meeting with a Ron Jensen, an elderly investor in his 70s from Hamilton. He and his wife invested in a unit that was supposedly sold to them by Blue Chip New Zealand.
The sum of $200,000 was raised by taking a mortgage on his property, but the property that he was purportedly sold does not exist. It never existed; he may well have a claim against the solicitor who advised him on that transaction. These are issues I think we need to look at.
Boscowen earlier in the day had brought to the House a petition by Suzanne Edmonds.
This lady has championed the rights of some of these people, in relation to their losses, and she has called for a royal commission. I personally think that that is unrealistic, but a lot of these issues can be addressed by the Commerce Committee, and in particular the issue of the accountability of directors, trustees, company management, and other parties associated with failed finance companies.
Boscowen went on to say of the victims of investments that went sour and companies that went belly up:
I recognise that these people are adults; they have gone into investments with their eyes open and with advisers, but in some cases they have been misled, duped, and possibly even defrauded. I think that this is a very serious issue that concerns all members in this Parliament.