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Who said it?

I should not be blogging in the middle of the holidays, but I have a quote ringing around my head: half-formed, I cannot remember the source, and I have tried googling it. It runs something like:

'Almost everything important in life is connected to the making of a happy home.'

I cannot help thinking that whoever thought that would have bought insurance to cover their family. Have a happy and safe holiday!

Best Wishes!

Greeting Clip

Our best wishes for the season to all our readers and clients. I shall be available on mobile for those who are really keen to talk. Otherwise we shall be back in the office on the 6th, and the New Year will see Kelly Pulham returning to the office as well. Have a safe and happy holiday - Russell H

Freedom of Financial Advice Reforms - Some Roll-back

In Australia some of the most intrusive and difficult to manage elements of the financial advice reforms are being rolled back.

The elements that will be reformed include:

  • Withdraws the requirement to have clients agree every two years to continuing fees
  • Withdraws the prohibition on conflicted revenue

See link to this article.

On the other hand, the environment remains more regulated overall than it is here - not-one should believe that these changes indicate that the recent changes here will in any way be rolled back. On the contrary, many would argue that we still have some way to go, at least in the practical implementation of our own regime, before it is operating at a standard we would all be comfortable with as consumers of financial services.

Low Labour Productivity in NZ Insurance Sector

In a report published by the productivity commission labour productivity is contrasted between New Zealand and Australia. As the website Interest.co.nz identifies, the financial and insurance sector fares badly in the comparison. Link.

This may be due to a combination of factors, but a lack of investment in education and systems would be my first two candidates to explain the difference in productivity.

FMA Guidance on Limited Advice

Goodreturns has an article on the new guidance note on limited personalised advice. I think the FMA has a lt of important work going on at the moment so I was surprised to see this release at his time, especially as it offers little to advisers.

It is essentially a discussion of how limited advice could be given. The product of the discussion for me is a feeling that the work required to allow limited advice to be given safely is sufficiently onerous that it provides no economic incentive to do so. It provides no mechanism to allow the adviser to safely offer limited advice - they get no relief from any aspect of their Code commitments. To be fair to the FMA they are the regulator, not the legislator, and may have no way to create such safe areas even if they felt inclined to do so.

There will be no great upsurge in limited advice as a consequence of this guidance.

Here are the links:

FMA Guidance note on Limited Personalised Advice

Goodreturns article on the Guidance note (by Susan Edmonds)

Suitability and Misrepresentation in Financial Products

Our compliance guru (Rob Dowler) has picked out this media release from the Commerce Commission. At first I was unsure how relevant this would be to our implementation of the Financial Advisers Act and concern for suitability in advice. In the media release the Commerce Commission talks about "misrepresentation" and the need for the courts to rule in the matter of sales of interest rate swaps to mainly rural clients. However, as an example of a complex financial product being sold to non-experts it may reveal an important principle.

As a product is more complex it may be harder to avoid misrepresentation. Or put another way, it takes more explanatory effort and suitability testing in order to make a compliant sale. Or, still another view: the greater the imbalance in knowledge between vendor and purchaser the more the onus is on the vendor to ensure suitability.