At last: financial advisers’ fees you can understand
By Pattrick Smellie
Nov. 25 (BusinessDesk) – The financial advice industry will try and win back public trust by radically simplifying and standardising how their fees affect savings investments.
From April next year, all financial advisers will have to show how their fees would affect returns on a $10,000 lump sum or an annual contribution of $1000.
“Potential investors can immediately see the effect of the fees and charges in operation,” said Sean Carroll, chair of the Investment Savings and Insurance Association (ISI).
While the new Standard will initially be compulsory for ISI members only, ISI wants it to become the benchmark for the entire funds management industry.
“We are looking forward to working closely with Ministry of Economic Development officials to develop such an industry-wide standard.”
Further initiatives to improve disclosure and reporting standards for managed funds are planned for 2011 and 2012, with standardising investment performance reporting and portfolio holdings within a fund, and the separation and disclosure of adviser remuneration and management fees among planned moves.
ISI is taking the voluntary action to try and demonstrate the tarnished industry is capable of self-regulation and to pre-empt the potential for legislation dictating such disclosure in future.
An MED discussion paper is due on KiwiSaver scheme disclosure standards and is understood to be within days of release, following incidents such as the misreporting of returns by KiwiSaver provider Huljich Wealth Management, which resulted in criminal charges being laid by the Securities Commission last week.
ISI had “recognised a need to increase public confidence in the financial services industry, and has been working hard to develop new industry standards that will support this,” said Mr Carroll.
The new standard is the first of a series of planned changes, and will apply to “on-going fees and recovered expenses of an unlisted collective investment.”