Does the UK experience of financial regulation have lessons for NZ in the provision of a state-run "Money Advice Service"? A heavily cut-down narrative runs like this:
- Much generic financial advice was once given away by banks, insurers, and all kinds of financial advisers as part of their marketing activity to engage with potential clients.
- Not all of it was good, but most of it was, often because of all their activities this was unconflicted.
- The UK introduced progressively heavier regulation on the sale of financial products and the giving of financial advice.
- This increased the costs of seeking financial advice, and also the risks of providing the generic advice to consumers who did not become full clients (because tough penalties are imposed on advisers not following a full advice process).
- Virtually all 'generic' financial advice was removed from the process at that point, a great loss to many consumers who received a lot of help from such material or commentary from their financial advisers and product providers.
- The gap has reduced financial literacy as a whole and Government is worried that an increasing number of people are not using many helpful financial products or learning good basic financial management skills.
- So they have introduced the Money Advice Service. This has met with a lot of hostility from the UK financial adviser industry.
They have some legitimate complaints (the use of the word advice is completely unfair, as the service is strictly limited to the provisiion of information, not financial advice) and some less legitimate ones - such as a fear of creeping nationalisation of financial adviser services. This article from Money Marketing is good on the subject - but so is the first comment below it. Go and read it.
Why should we care?
Will our Financial Advisers Act create such a situation here - or will we manage to preserve the good general information and basic advice that has been available?
Is www.sorted.org.nz our equivalent of the Money Advice Service anyway? It has long since broadened out from offering information about retirement to a wider financial literacy role. Has it hurt the role of financial advisers? I doubt it.
Having said that, it would be a shame if we allowed our shiny new regulatory structure for financial advice to undermine some of the public goods delivered currently, free of charge, from the industry. I'm sure it is possible - but is is probable?