Industry at crossroads

- David Pine | NZIJ RISK MANAGEMENT LTD


The insurance and investment advisory industry is in some turmoil at present as the Government moves to require higher standards of advisers in the wake of the finance company debacle.

The central idea the Government has come up with is to divide us advisers into two camps. The first, Category A, will be authorised to give advice on pretty well all financial services products, while Category B advisers will only be able to deal in certain types of insurance. It is likely that all advisers whether they be Category 1 or 2, including those of us who have qualifications and a lot of experience, will need to undertake further study within a given time frame.

If the new regulations are too harsh they could create a vacuum as good advisers decide it’s all “too hard “ and leave the industry. On the other hand Government wants to be seen to be doing something tangible to protect the public against dodgy operators. There are encouraging signs that Government wants to cause as little disruption as possible.

There are two red herrings amongst all of this. The first is the question of commission, and whether the concept of our earning commissions should be banned altogether. The idea is that somehow all advisers are magically drawn towards recommending products that pay the highest commission. Apparently we don’t have the capacity to keep the client’s interests ahead of our own where commission is involved. The second is that advisers who earn commission can’t be objective.

Consumer magazine and the press would have you believe that these assumptions are true but they’ve never worked in the industry and certainly not for a prolonged period so they wouldn’t actually know.

As someone who has been an insurance and investment adviser continuously for just on 37 years I personally take strong exception to these assumptions. Almost all of my earnings have been in the form of commission. Sometimes we are paid less than is reasonable and sometimes more. It all evens out over time. Certainly there are fringe operators in our ranks who have caused problems out of greed and shoddy advice but in my considerable experience these people are very much in the minority.

Another area of concern in the new regulations is that Government needs to be mindful of the small operators in our profession. A recent survey in NZ about people’s attitude to business showed that some 70% had a favourable view of small business while the same percentage were inherently suspicious of big business. A substantial percentage of our members  are small businesses.

Long after the Government and Consumer and the press have grown tired of us and moved on to other things, the members of my profession will still be going proudly about their business, seeing the people, putting clients’ interests first, and doing the business.