Authorised Financial Advisers (AFA) under Code 1 are required to put their client’s interest first and act with integrity.
Not to be confused with registered financial advisers (RFA) who are not subject to Code 1.
It would be nice to think…………………
It would be nice to think that our banks, insurance companies, and investment houses are required by law to put their client’s interest first and act with integrity.
But are they? Do they? Here are some recent headlines and news snippets from around the world.
BNP is (was) a large and reputable group but were ordered to pay $US16.6 million in damages to a couple to whom they had sold an 'unsuitable investment'.
The couple won the case because BNP had encouraged them to invest the bulk of their assets in a particular security that BNP knew should not have been sold to retail clients.
Banks fined over $5 billion for rigging global currency markets
JPMorgan Chase, Citigroup, Barclays and The Royal Bank of Scotland conspired with one another to fix rates on U.S. dollars, and euros.
Were fined $1.9 billion, something to do with not observing money laundering laws.
A Swiss bank
Were fined $211 million over tax evasion.
Headquarters recently raided in a tax-fraud probe.
They own 50% of Craig’s in NZ who were recently fined $30,000 and censured by the NZ Stock Exchange Disciplinary Tribunal for failing to identify retail client trading orders properly to the market.
Twisting life insurance policies – see “banking bad” on Youtube.
NZ firm to pay $1.5 million
NZ investment firm Milford Asset Management will pay $1.5 million following an investigation into allegations of improper trading by one of its staff.
NZ banks accused of twisting KiwiSavers
The CEO of Fidelity Life Assurance commented recently that “people are complaining that they go to a bank for a home loan or something and sign a bunch of papers. Later on they find they've transferred their KiwiSaver account to the bank and were completely unaware of it.”
ING & ANZ
Huge losses via CDO’s promoted as a safe investments in 2010 (ANZ made up 60% of the losses - a reported $450 million).
Not in the news
A smaller fund manager in NZ had CDO funds similar to ING that got in a real mess in 2009. They renamed the funds, or split them into two tiers, so before long no one really knew where they stood, they just knew they had lost heaps.
Large company sues advisers who leave
A large group in NZ have taken several advisers (who left them) to court, accusing them of taking their clients with them. Contracts notwithstanding, I thought clients did not belong to anyone, but were free to choose who they deal with?
The NZ banks; love them or hate them, we need them
The government is well aware that the banks are critical components of our economy and certainly don’t want them to fail. Hence you don’t hear much from the Beehive, even when the big four all make over $1 billion profits every year. I guess the government thinks the more they make, the less likely they are to fail.
Unfortunately the banks are well aware of their importance, and can afford an army of lawyers to “lobby” the government of the day, to keep the rules as much in their favour as they can.
It would be nice to think they put their client’s interest first and acted with integrity. But do they? I will leave you to decide.
Certainly they are the only place for short term money, but for longer term investments, you may do better if you look for an AFA who is required to act with integrity and put your interests first.
Bigger does not mean better
Not much sign of integrity or putting the clients interest first in any of these examples, is there? Like my wise old friend said, money attracts the greedy. It always has and always will.
Tip no 5 - It’s pretty clear, just because they are big and glossy does not mean they automatically have your best interests at heart, or that you can trust them.
Don’t despair, there are many you can trust
You have to look at the rock, around the rock, and under the rock, and maybe even chip at the rock with a big hammer and chisel, to see what it is really made of.
Next week we will look at what, when, where, how, why, and who you can trust.
Supplied by Alan Clarke, financial & retirement adviser, & author.
His 2nd book “The Great NZ Work, Money & Retirement Puzzle” is now available.
Alan is an independent authorised financial adviser (AFA) FSP26532.
His disclosure statement is available on request and free of charge.