Why our financial advice sector needs to be revived to better represent what New Zealand actually looks like

Why our financial advice sector needs to be revived to better represent what New Zealand actually looks like

By Jenée Tibshraeny 

I’ve never been one for advocacy journalism, but I’m going to put my foot in it and call for more Gen Yers, women and migrants to get into finance.

Why? Because a whopping 78% of the 1,800 Authorised Financial Advisers (AFAs) in New Zealand are men, according to figures released by the Financial Markets Authority (FMA).

Put another way, there are only 395 females who have reached the highest adviser qualification in New Zealand.

As for age, there are a dismal 175 AFAs under the age of 35 and 433 between the ages of 36 and 45.

Figures collected by the FMA don’t show the ethnicity of the country’s AFAs, but my guess is they are largely European. The ‘male, pale and stale’ phrase used to describe the sector must come from somewhere right?

Now I don’t have anything against the 50 and 60 year-old blokes in the sector. In fact, a proven track record is what I would be looking for when shopping for an adviser.

But the reality is, who will replace our current cohort of AFAs when they retire? The sector is losing more people than it’s gaining every year. AMP director, Blair Vernon, has previously told Interest.co.nz an under-supply of advisers could be a 10 to 30 year issue.

Getting advisers to be more representative of society

The other reality is, money is personal, and when you talk to someone about what to do with it, you’d like to them to be on your wavelength and understand your values, culture and lifestyle.

The more ethnically diverse New Zealand becomes, and the more varied our personal and thus financial lives become, the greater the need for diversity among the experts we turn to for financial advice.

While the stock standard 30-year-old Kiwi may have been married and living in their own three-bedroom home 20 years ago, this is no longer the norm. In fact, there is no norm anymore. You can’t put anyone in a box.

Some 30-year-olds will be focussing on their careers, while others will be splashing out on travels. Some will be supporting their families, while others will be being supported by their families. Some may be struggling to get on their feet financially - unable to get a job or still studying - while others will already be harbouring a sizable nest egg.

The average 30-year-old in New Zealand is also increasingly less likely to be Pakeha and therefore may have a more family-centric rather than individual approach towards how they are going to prioritise spending and investing their money.

For Aucklanders in particular, buying a house may no longer their primary financial goal. They’re looking for other financial investments, education or experiences to invest their money in.

The point is, we need the spread of financial advisers in New Zealand to better represent our population.

Massey University Financial Education and Research Centre director, Pushpa Wood, is very vocal on the matter.

“I want the adviser sitting across [from] me… to help me understand how best I can make decisions which do not necessarily compromise my cultural values, but at the same time safeguard my financial future.

“You cannot expect someone who does not have a background with that culture to understand all the nuances of it.”

Transforming advisers from ‘do-gooders’ to ‘professionals’

Wood says it’s a matter of training those already in the industry to better cater to the needs of our society, as well as attracting a broader range of people to the industry.

Both these things need to happen fast, she says.

If you want to attract people to a new sector, there needs to be sufficient incentives - the income needs to be reliable, the career choice needs to be low risk and the education and compliance levels need to be manageable.

Wood says the financial advice sector has to be made more credible.  

“We need to improve that from the do-gooder job to a profession… We need to improve the status.”

Wood admits, “People are becoming a lot wearier and more cautious [of financial advisers].”

Advisers have come under fire for being paid in commissions and thus not always acting in their clients’ best interests.

An FMA report on ‘churn’ released in June for example, found there are at least 200 advisers likely to be encouraging their clients to change life insurers, even if it isn’t in their best interests, so they can earn up-front commissions of up to 200% of their clients’ annual premiums, or soft commissions like overseas trips.

The FMA’s newly released statistics for 2015 conclude: “Around 12% of AFAs receive more than half their revenue from one product provider — a slight decrease on the previous year [2014].

“The number of AFAs receiving commission has declined during the year, as has the number receiving fixed fees or an hourly rate from clients.

“Many AFAs continue to accept “soft commissions” such as business coaching, entertainment, international travel and vouchers from product providers.”

Hope a regulatory shake-up might translate into a cultural shake-up

The Government has refused to ban or cap commissions as it reviews the Financial Advisers Act, yet it has confirmed advisers will have to be more open in disclosing how they’re paid.

The adviser accreditation system will also be simplified and all advisers will be made to act in the interests of their clients. How this will play out in reality is yet to be seen.

The FAA review hasn’t focussed on putting policy measures in place to encourage greater diversity among advisers.

The government has also proposed that under the new regime, anyone that provides financial advice needs to be licenced by the FMA at a firm level, not individually. In getting licenced, firms will have some room to decide how they’ll abide to the law and the industry’s Code. Yet with this autonomy, will be more red tape and responsibility.

Sovereign’s chief distribution officer, Richard Klipin, told Interest.co.nz this is likely to lead to advisers coming together to form large multidisciplinary financial advice firms.

Wood agrees: “It will happen if the individuals and the autonomous financial advisers start to see training, continued professional development, compliance and dispute resolution, becoming onerous, expensive, time-consuming and complicated… rather than adding value to their professionalism. Then definitely, they will go for an umbrella which is there to take away all of that thinking for them.”

Yet if the training, etc can be seen as value-add, Wood reckons the buy-in to the industry could be increased.  

While the formation of larger advice firms has its downsides, I believe it may also boost the professionalism and thus diversity of the sector.

Larger firms may be better resourced to employ a more diverse range of advisers - perhaps in the same way banks have units specifically dedicated to serving the needs of migrants for example.

They will also be incentivised to be seen to be “responsible corporate citizens” by putting schemes in place to earn diversity accreditations.

On the flipside, the standardisation of a large firm may stifle advisers from using a more tailored approach to best suit their clients' needs.

Increasing access to advice 

I don’t want to discredit our existing AFAs, but as a Gen Y woman, I believe the sector isn't connecting with my demographic. Whether it's due to cost, visibility or accessibility, seeing an adviser isn't a done thing among my peers.  

It would be great to see it be made more commercially viable for advisers to see clients with smaller bundles of money. Young people trying to get on top of student debt don't have hundreds of thousands of dollars, but it's important they make the most of what they do have. 

The FAA review won’t be a silver bullet, but I hope it adds a fresh dose of professionalism to the industry, which will attract new and diverse talent.

In the meantime, I would like to encourage anyone who isn’t ‘male, pale and stale’ to show those in the industry that you care about your finances and could perhaps do with some professional help managing them. After all, the market will only supply what is being demanded. 

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

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pale, male and stale

What a disgusting racist and sexist statement in my opinion. Anyone who chooses their financial advisor based on skin color or gender is a dummy and deserves to go broke.

Agreed. You would be hung drawn and quartered if you made a similar title about a sports team being "too black" .

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Unfortunately this kind of language has been seen OK to use recently, as long as it is targeted at old white people, which is a shame because the people that use it are also campaigning against racism and sexism and don't seem to realise they are being hypocrites.

My opinion piece is about stamping out this stereotype. I haven't created the stereotype and would like to see it done away with. The point is, we need to increase our financial literacy and surely having a broader array of advisers is one of the many things that can be done to get more people engaged in better managing their finances. I am not trying to take anything away from existing advisers in the industry. I am also not saying you should necessarily pick your adviser based on their gender, age or ethnicity. But if you thought an adviser who spoke your language or had similar life experiences to you for example, would better help you manage your finances, it would be great if you had the option of using them.    

"a broader array of advisers" in respect to their age?sex? skin colour?

Hearing this sort of thing alot lately.

So..you want to see a type of 'quota system' for employment is this area? Me too.....in preschool and primary school teaching.

Agreed. Id' also like the term 'Midwife' replaced with 'Midperson'. I would also like to see some scholarships for young white males at the Uni's. i.e some equality would be nice for them too. Makes me sick how the younger men are discriminated against these days.

I don't agree. White males still have advantages in life other ethnicities and women do not enjoy, and it won't just right itself.

Is that what it's like walking around AKL for you Zac?
King Zac! Lol

Such as?

Actually, it's much easier to get into a US Ivy league university as a man because they seek 50/50 balance and girls do better in high school on average these days. Also easier to get in as white than asian for many places. Yes, we probably should replace midwife with something gender neutral as there's no reason a man can't do that job.

Lets face it human beings are political animals and it really is a jungle out there. We are wired for survival and for people with some power, cultural imperatives tend to hold sway so we will endeavour to surround ourselves with people who are most likely to agree with us, and support us. Thus white male will more often gravitate to other white males of similar age groups, women the same, Maori the same. This even extends to socio-economic groups, which may also mean that some of the other perhaps racial and gender lines may become blurred, Because culturally our current civilisation is based in a male dominated one, despite the fact that it is slowly changing away from that, there remains places where that dominance is still clear.

A a white male i have worked for many years with women, and today i actually prefer it, as i get utterly sick of unproductive, mindless testosterone competition that often undermines productivity and getting real measurable results. My experience is that well mixed work environments gender wise work best. Racial divisions are irrelevant as talent knows no racial boundaries. Plus my experience is that those with a racial drum to beat generally are working to get a position above their competence level, increase costs without a commensurate gain in productivity.

Bottom line the only questions that need to be asked are can you do and are committed to the job, and can you fit into the team to effectively make it strong and better? The rest is just BS.

...it would be great if you had the option of using them.

Yes.
My doctor, lawyer, dentist and accountant all share my culture and ethnicity because:

“You cannot expect someone who does not have a background with that culture to understand all the nuances of it.” - Pushpa Wood

> spoke your language

If people can't speak English they shouldn't be living here.

> it would be great if you had the option

The market does respond to demand. For example Google "Barfoot and Thompson top agents" and you'll see the top agents do speak a variety if languages.

What a load of racist sexist bollocks this article is.

Oh lord. Name a single disadvantage white men have as a group which means that this "racism" and "sexism" has any effect on their position in the world whatsoever. That's where it becomes relevant.

Lack of scholarships at University. Now sit down.

So glad someone is brave enough to speak up for the lack of white male voices in academia.

So you are saying there are no scholarships at University that white men can apply for? Prove it.

[ Unacceptable personal insult. Ed]

I'm not the one making the point, so am not sure why I am expected to prove it. Enough with the insults, too, they demean you more than they demean me.

[ Unacceptable personal insult. Ed]

[ Unacceptable personal insult. Ed ]

Have a lovely weekend.

Oh man, I missed out on the insult action. I would have been up for it too!

[ Unacceptable personal insults. Ed ]

Or maybe this profession is going to become obsolete.What can a financial adviser provide to 99% of the population that a well crafted software cannot?

How well crafted does a program that spits out a bit of paper saying "Spend less, save more." really need to be anyway?

If not well crafted software then perhaps ahah let me think oh that's right COMMON SENSE.

Kiwis haven't picked up on how much commissions are affecting their future net worth. It'll be too late before people understand that effect that has from when they start work through to retirement.

Quite a good point about people that don't have a lot of money as anyone studying is just going to start out their career with a lot of debts and a sub-zero net worth. I know plenty of people reaching their 30s and they still have student loans and a small sum invested in their kiwisaver account. Most of their kiwisaver is sitting in low risk/return default accounts, it's going to be pretty grim in 35 years.

Any smart female financial adviser moved into Real Estate sales ages ago.....

Isn't there a synonymous relationship between them?

My Doctor is a male was born in India, my Accountant is female and was born here and I don't have a financial adviser. I am of European and Maori descent. Going by what has been said here I need a financial adviser from my own culture. Thank God my grand parents didn't think that way when selecting Marriage partners. What was important was what made them happy and if they were in love. If I were to get a financial adviser I would want one who understood financial planning and gave me good advice regardless of their race, creed or sexual orientation.

Good article. To all those commenters above objecting, please go and take the Harvard implicit bias test on Gender and Career:
https://implicit.harvard.edu/implicit/selectatest.html
If you come out unbiased I'll personally be surprised (and will apologise) because I'm not sure you really read the article.

Why should I take that test. Obviously I'm biased. I'm human. So what. It doesn't change the fact that choosing a financial advisor based on gender is stupid. But please go on and do that for yourself.

It's only white males who are not allowed to be biased, or judgemental.

We all fart too, but try to not to do so in public. Bias is not something to be proud of, it is something to strive to overcome. Good processes can help - e.g., blind auditions for orchestras. I did take the test and came out with little to no bias, also for the test on skin colour preferences, which surprised and pleased me.

Perhaps you're a beta male?

"It's about ethics in finance journalism"

BOOM

[ Personal insult unacceptable. Ed ]

I don't think you'll find too many people in their 20s or early 30s with that much money they decide to go with a financial adviser. Most wouldn't understand what they do and wouldn't want to pay for the advice. And the fact they get a commission from the provider the recommend means they have a conflict of interest.

Well I thought that finance is one of the last areas of free thought and rationality.

I come to Interest.co.nz partly because I expect its writings to be free from the left wing social justice advocacy that plagues much other media.

Yet here I am surprised to find myself unwittingly subjected to a sexist, ageist, and self-loathing racist who doesn't grok the difference between equality of opportunity and equality of outcome.

I suggest introducing trigger warnings for next time.

This opinion offends my sense of white male patriotism and has triggered my feelings. The only solution to this is that clearly the author should resign. It would be nice if I had the option of reading articles that don't offend me. Diversity is fine just as long as it's not intellectual diversity.

O hai Bob Jones, didn't see you there.

Is this the assembly point for an orgy of whingeing? Because I'd like to wallow in imaginary victimhood over something.

On the contrary many of us are celebrating being allowed to be discriminating again.

I'd guess you want someone who has dealt a bit with money to trust them.

That could be quite a dangerous quality to base trust on. It says nothing about honesty or integrity. Look at David Ross and Mark Hotchins.

One of the more common and dangerous human cognitive biases is to attribute qualities to people based not on evidence, but on superficial unrelated characteristics.

https://en.wikipedia.org/wiki/Halo_effect

Isn't really touched on in the article, but if somebody fits the stereotype for whatever, people will make assumptions about their, integrity, skill and professionalism, with no actual evidence. Can get away with a lot more if you fit the stereotype.

My partner was very badly advised by a financial advisor, which was proven by the fact that her complaint to the banking ombudsman was upheld, costing her bank several thousand dollars. Yet that person was later proclaimed financial advisor of the year by that bank. Go figure. People want advisors who are competent, and it has nothing to do with race, colour or creed.

What race colour and creed was the advisor?

Anyone who needs someone else to manage their money, is by default penny-less, and if not, soon will be!
Color, race, or creed matters not!!

What a racist sexist article. I'm sick of this anti white male crap! Get there on merit, not quotas. The quotas are rigged against white males. White males have a much higher hurdle to cross, than those who get in through the 'diversity quotas' and they still dominate! Instead of wanting whats best for everyone, we have this stupid idea that it needs to be diverse, when it should be obvious that we need the best person for the job, and if that person is a hard working, intelligent white male, great. Good, take that guy, don't put in someone with black skin, just for the stupidity of it.
Look at all the stats, all the evidence, without quotas the system rewards merit, with quotas, the system becomes stacked against merit, and is biased toward skin colour. How stupid is that?

Read the article Skudiv. I have not once mentioned quotas. I have repeatedly said I don't want to discredit those currently in the industry, although I have quoted some FMA research stats which have highlighted commissions as problematic in some cases. I have mentioned that it is a problem retiring AFAs aren't being replaced - a point an AMP director has also raised as an issue. I am encouraging more women and people from different backgrounds to enter the sector... which is surely not a bad thing. More diversity does not equate to anti white male or anti meritocracy. 

You use Pale and Male as derogatives in the same context as stale. The pushback is growing, I have a feeling it is inevitable that it will end very badly, because people can't help but rank everything based on race or gender, instead of achievement. A focus on achievement, and hard work without talking about gender or race, is my antidote. I may not have the right answer, but I can see the problem, and I'm thinking and discussing it. I can see where the current accusations of racism in Education and Justice, are leading us, and it's a disaster for most of us.

This is such a perfect baby boomer soliloquy I'm not 100% sure it isn't a parody account.

NZEA Lvl 2 or higher at 18 years old
Asian 90%
European 86%
Pasifika 75%
Maori 68%
http://www.educationcounts.govt.nz/indicators/main/education-and-learnin...
Once you start ranking people by ethnicity, you end up with this type of distribution, for education, income, crime, teen pregnancy, and on. Asians on top? WTF that's not racism, thats merit, and merit alone.
So here comes the blowback from white males who are being discriminated against by quota systems, this is just the tip of the iceberg, as white males realise they also had a shitty start to life, and were no better off than anyone else, except they had to work twice as hard, to earn recognition!

Traditionally strong sporting schools are resorting to importing kids from the bottom of your list to make up for the lack of these skills/wills at the top of your list.
Anyone who is white and male and thinks they have no advantage in this and other western countries is deluded. I belong to the white mae group and my wife belongs to the Pasifika group, walk a mile in someone elses shoes would be my advice.

Tell me moar about this advantage? Is it genetic?

..caught a comment on Bloomberg last night...that there are more financial advisors over 80 than under 30. Not sure if it was US wide or particular State.

Dreadful article.
Financial Advisors are rogues, end of, teach financial literacy correctly in schools and prepare our youth correctly.
Financial Advisors are only there to line their own pockets on other peoples lack of knowledge.
They are as bad as insurance advisors and second hand car dealers.
If you are smart, give them a wide berth.

Nonsense. I worked in financial services most of my life and have known lots of highly competent and ethical advisers. You assume everyone has the ability, time and interest in getting into the detail of investing; many don’t. Including some very smart and successful professional and business people. I direct invest and manage my own portfolio but have an adviser who is first rate and whose knowledge and tips have served me very well indeed. Embarrassingly though, an aged white male.
A lively and challenging article Jenee, keep them coming.

Totally agree middleman.

I don't understand why you would be embarrassed that your adviser is an aged white male, especially if you are also in that category. To me it would make sense as there is so much more to communication than just words and trust depends on many factors.

Facetious
adjective
treating serious issues with deliberately inappropriate humour; flippant.

I see, Poe's Law got me again.

middleman, you may be an ethical FA and ups to you if you are in this category, I stand by my earlier comments, Financial Advisors are rogues lining their own pockets. Stay well clear. The article is a nonsense.

I'm not a financial adviser. Just got to know quite a few rather well in my career. There were some seriously dodgy ones but the industry has been cleaned up a lot since I hit the beach 5 years ago. I reckon your perception of them all being rogues may be a bit out of date and if you have been burned by a crook, you have my sympathies. But there is huge need in NZ for (good) financial advisers and I'm with Jenee when she advocates getting a more diverse range of people into the industry.

Not NZ, I am a financial adviser (AFA) and I'm not lining my own pockets - my wife would love to stop working, travel the world and buy more shoes but alas she can't. I really think you need to have a cuppa and a lie down.

Lol nice Borat joke.

I wonder if the “male, pale and stale” statement is often used facetiously although I believe it is used to bring about change – namely the decimation of the male, pale and stale in a particular industry or walk of life. Imagine if as an adviser you only accepted male, pale and stale clients – the horror!
I kind of object to the word stale as it is clearly pejorative. Stale implies that it should be chucked out.
I propose we change it to male, pale and badass. When we meet in the street, even if we don’t know one another, the greeting should be a high five with a shout of “don’t be stale, be badass!”
I wonder how this will be greeted though. I’ve noticed whenever a pale male is no longer stale there is a storm of protest – Trump for example.

You are endorsing Trump now? Good to know.

Stale could be totally accurate if the person in question, irrespective of gender, race or age, has failed to keep up with the industry, options and risks. the world is continually changing and anyone with money to bank/invest needs to keep abreast of the issues and risks to make any kind of money out of it. Getting "ripped off" as referred to in an above comment, could simply be accepting out of date advice that is no longer accurate, rather than false or biased.

Because we aren't in the USA. Please use the Queen's English - Badarse is the correct spelling.

I would but according to the Urban Dictionary, It's unpopular, under-used and extremely difficult to pull off without sounding like a total muppet but I think you knew that already.

Stale is pejorative but it got our attention, eh.
I'm male and pale, proud to be such. Not at all insulted when XY'rs label me thus as I then have license to force them to defend the proposition that we are all really mini Trump's in drag.
I try to not take myself too seriously.
Badass, I like.

Whole lot of white boomers in this comments section struggling with their own diminishing relevance.

It's so funny to watch :)

People with a brain, read words. Not watch them.

You're so much fun! :D

Is it wrong to struggle against one's diminishing relevance?

Anyway just the other day we were being accused of bringing back feudalism and condemning future generations to a lifetime of serfdom. Sounds pretty relevant to me!

Don't you have a Herne Bay Concerned Residents Association meeting to attend?

"Do not go gentle into that good night,
Old age should burn and rave at close of day;
Rage, rage against the dying of the light."

Of course Dylan Thomas was too pickled to ever get stale, but two out of three ain't bad.

In a Peanuts cartoon, Linus Van Pelt says:
"It is better to light a single candle than to curse the darkness"

Next frame - Lucy is in a dark room shouting "Stupid darkness!!!"

Zachary, a hat tip for honesty.

[ Unacceptable comment. Because of personal insult. Ed]

Amazingly low threshhold some people have for flipping out over how persecuted they are. Just the suggestion that other types of people also have something to offer in the financial advice arena and the anguished wailing starts.

Putting this whole interesting debate aside for a minute, does anyone have any suggestions as to how one finds good financial advisers? Black or white, male or female, old or young :)

Start here, maybe:

http://www.ifa.org.nz/
https://www.consumerprotection.govt.nz/get-guidance/credit-banking-and-f...

One of those things where word-of-mouth recommendations are useful, if treated with appropriate skepticism.

Thanks Kakapo! Appreciated.

The FMA website has a list here - suggest downloading the AFA list.

http://fma.govt.nz/compliance/lists-and-registers/

Interesting article. I was having the discussion last night with someone pretty worked up about gender inequality, what decided the argument was when I said "the market doesn't care, and the market is always right".

BOOOOOM! Nailed it!

god i wished they would hurry up cause if sick of listening to whinging brown and broke...