Kiwi advisers underperforming
A significant proportion of New Zealand financial advisers are providing inadequate advice and failing in their duty of care to clients, according to new industry research.
The six-month study of 25 advisory firms by Wellington-based accountants Stephen Thorner and fi360 Australasia, the local division of the US-based Foundation for Fiduciary Studies, found that many had limited product ranges, did not report adequately to clients and placed an over-reliance on “old-school” experience.
Stephen Thorner and fi360 carried out the research to establish how a global fiduciary standard would help investors and trustees understand what advisers were doing with their money.
Fi360 managing director Ross Fowler said that most advisers’ businesses were based on honesty and integrity rather than a detailed standard of care.
“They’re the most difficult. You’re faced with someone who is credible, who can look you in the eye and say ‘I’m doing a very good job’. But when you scrutinise what they do and how they end up with the things in their portfolios, there is a huge range [in practice].”
The research found that advisers performed poorly in two key areas: formalising an investment strategy and reporting back to clients.
Fowler said that some advisers relied primarily on close relationships with investment fund providers and did not make a concerted effort to find the right products for their clients.
He said the research was the first step in creating voluntary fiduciary guidelines for advisers that would help trustees, such as accountants and lawyers, evaluate the portfolios they were creating for clients.
“The issues that arise is that someone can be of the highest integrity and completely honest and give you a poor quality mix of products.”
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