A consumer watchdog has issued a scathing assessment of the financial advice industry after saying it has found evidence of widespread incompetence.
Consumer New Zealand sent mystery shoppers to gather advice on investment and pre-retirement plans. Out of 17 plans, an expert review panel failed all but three of them.
Consumer New Zealand chief executive Sue Chetwin says commission incentives were the reason why many of the advisers pushed particular products, without strong reasons for doing so. She is calling for a complete ban on such payments.
Ms Chetwin says that, in general, the advice was "scandalously poor" and the Government needs to do more to regulate the finance industry and protect investors.
The panel found poor analysis, unclear and large costs, bad products and advisers portraying themselves as independent when they were clearly not, she says.
The panel rejected as inadequate plans proposed by many major firms, including Westpac Bank, AMP, Money Managers and Rutherford Rede.
Panel member Craig Wylie, of Financial Fitness in Wellington, told Morning Report a lack of full, clear and concise disclosure of fees was the main reason the panel came to its conclusions.
Mr Wylie says the panel identified a major problem with the disclosure of the methods and levels of remuneration in many of the plans.
"One of the problems we did have on the panel was actually trying to understand just what the fees were and that was one of the reasons that a number of potentially good plans perhaps were failed."
Institute supports more regulation
The Institute of Financial Advisers says it supports the need for more professionalism and regulation in the sector.
Chief executive David Hutton says the Financial Advisers Act 2008, which has yet to come into effect, will remove many of the problems identified.
Mr Hutton accepts the criticism made by Consumer New Zealand.
The Securities Commission says the act includes a code of conduct and advisers will have to be registered with the Companies Office.