Although tighter requirements around disclosure may cause ‘short-term pain’ for RFAs, the changes will strengthen the industry in time, says Cave Financial’s Managing Director, Michael Cave.
Cave’s comments follow MBIE’s recent announcement that it is seeking feedback on disclosure requirements (see: MBIE Seeking Feedback on Disclosure Requirements).
Cave, who is an Authorised Financial Adviser, said AFAs are accustomed to giving full disclosure of their commissions and performance incentives, since the Financial Advisers Act was introduced following the Global Financial Crisis.
The RFAs who primarily offer life insurance and mortgage advice solutions will be hit by the changes hardest, he said, since they were not part of the tightened disclosure rules in 2008.
“When it comes to telling clients exactly how and what we get paid, us investment guys have been doing that for a decade”
“When it comes to telling clients exactly how and what we get paid, us investment guys have been doing that for a decade,” Cave said.
“However, it’s time those rules applied to all advisers, which will help deliver consistency across the sector. It will also force a bit more self-accountability as disclosure becomes a bigger part of the RFAs’ client meetings,” he added.
Although Cave doesn’t think disclosure shortcomings have been a major issue for the industry overall, he said it’s the right thing for all advisers to operate to the same standard.
“Legislating to ensure about 7,000 advisers will have to operate to the same standard that 1,500 of us have been doing so for ten years is the right thing to do. It will end any confusion and provide certainty to consumers,” he said.
“Too few New Zealanders seek financial advice despite all that’s at stake when they’re making big decisions. These kinds of measures will hopefully help change that as they provide that last piece of the puzzle in our industry professionalism, help strengthen our capital markets, and offer consumers more information and ultimately choice.”
Cave said the majority of advisers prioritise their clients’ interests first and foremost and their strong relationships with their clients are central to their success.
“Neither of these factors will change. However, both can only be enhanced by greater transparency, and that’s got to be good for New Zealand consumers and the industry alike,” he said.
Click here to take a look at the results of our poll asking whether you thought commissions should be subject to more prominent disclosure.