Nash Stuart: Financial Advisers Amendment Bill (No 2) Financial Service Providers (Registration and Dispute Resolution) Amendment Bill — Third Readings 
Text is incorporated into the Bound Volume 
Nash Stuart: Financial Advisers Amendment Bill (No 2) Financial Service Providers (Registration and Dispute Resolution) Amendment Bill — Third Readings 
[Sitting date: 22 June 2010. Volume:664;Page:11992. Text is incorporated into the Bound Volume.] 
STUART NASH (Labour) 
: 
 I stand to support the third reading of this legislation. I have given speeches on the first reading second reading and Committee stage of the Financial Service Providers (Pre-Implementation Adjustments) Bill so there is not much that is new that I want to say. But I will sum up the points I have made because I think they are all very important. 
I come back to something that Melissa Lee said; her colleague Sam Lotu-Iiga mentioned it as well. I fundamentally disagree with their point. They talked about the inability to legislate for risk. I do not agree with that. I think that this legislation is legislating for risk. I have talked about the fact that there is something called the risk-free rate of return. It is usually understood to mean US Treasury bills because there is nothing safer to invest in than US Treasury bills. Anything with an interest rate that is higher than that carries an element of risk. But one risk that investors should not have to take into account is the risk of negligence incompetence or very poor form on behalf of financial advisers. When Melissa Lee said that people have to account for risk she was right. But I say that savers the people who go to financial advisers expect advice on different risk types. They do not know how to assess risk properly so they go to financial advisers to ask how to properly assess their risk and have a balanced portfolio. That is the role of the financial adviser. I talked about how the understanding of risk and the assessing of risk is one of the fundamental developments of the global economy. 
This legislation is supported by the industry and there are reasons for that. One of the fundamental reasons is that the reputation and good name of a lot of very good financial advisers have come under attack in the last few years because of the unscrupulous people operating in this industry carrying the name of financial adviser. We encourage the good people to remain in this industry. We want people to enter this industry but only in the knowledge that they will be trained and that they need to be registered. They need to have the education and the skills to be able to offer advice to people who want to invest—to tell them how to do it. People go to financial advisers for advice. 
I remember hearing a case where someone talked about a balanced portfolio being investment in five different finance companies. That is not a balanced portfolio; that is the sort of advice that was given out by those fly-by-night characters who had no education no grounding and no experience in this game whatsoever. It was an absolute travesty for the good people of New Zealand that we allowed those people into the sector. Now with this legislation and the previous two bills that were put up by the Hon Lianne Dalziel those sorts of people will no longer be able to operate in this industry. 
We talked about financial literacy as well and it is a very important point; it transcends way beyond the boundaries of this bill. It is incredibly important. Again I come back to something that Sam Lotu-Iiga mentioned. He said that a friend of his with financial qualifications finds it difficult to wade through a 75-page prospectus. I find that astounding and incredibly worrying. My point is that if someone with financial training has great difficulty wading through a 75-page prospectus how is someone without any financial training supposed to understand the requirements? It is law to put out a prospectus. It must be done if one is offering securities to the public. The inclusion of everything in that prospectus has been deemed by Parliament to be absolutely necessary in order to make a sound financial decision. If people cannot understand a prospectus they go to a financial adviser. A financial adviser is supposed to have read and understood the conditions within a prospectus and therefore be able to offer advice around different risk profiles in different forms of investment. Sam’s point was very clear: friends of his with a legal or financial background have great difficulty understanding a prospectus. So how can ordinary New Zealanders understand? They simply cannot. That is why the financial services sector is a very important part of the New Zealand economy and it is why we need people who are suitably qualified to be operating in this sector. We have now got rid of people who have no qualifications and who have no intention of getting qualifications. 
Financial literacy is a problem. My personal view which is not Labour’s view necessarily is that some form of economics and finance should be compulsory up to the fifth form. New Zealanders need to leave school understanding the basics of economics accounting and finance. It is not difficult but it needs to be part of the prospectus. I wonder what Allan Peachey’s view on that is; I suspect he probably feels the same way. Coming out of school and not understanding a thing about economics or finance is a huge barrier to this country going forward and that needs to be addressed. But like I mentioned it is outside the ambit of this bill. The parties will have to work through it. 
Another point is that New Zealand quite simply cannot afford to have the millions of dollars disappear that have been shed from the balance sheets. Raising capital is vital to the depth and the breadth of business in New Zealand and we absolutely must have a financial services sector that people can operate in can invest in and can raise money from with certainty and with confidence. It is very very important. Our capital markets have taken a huge hit as a result of 30-plus finance companies going under firstly because people now have an inherent distrust of the capital markets and secondly because people are going back to investing in houses. We understand that that is a major problem. It is not part of the productive economy. But New Zealanders have had money gouged out of their accounts by finance companies so where do they turn? A lot of conservative Kiwis will go back to the housing sector. That is not something that we really want to encourage. We really need to encourage an environment in which people believe they can invest. They can assess the risk and can invest in that environment with a level of certainty that the advice they have been given is not negligent or incompetent. 
Finally this legislation is about ordinary New Zealanders. I talked about Mark Hotchin’s $30 million mansion. I will give members a quote from the  
New Zealand Herald 
: “A half-finished $30 million mansion … is big enough to contain 13 average houses just on its floor space. … It will contain seven bedrooms a 25m swimming pool and a garage for 12 cars. Its study games room and home theatre alone are as big as the typical house—without counting any of its living spaces including seven bedrooms.” That house was built on a graveyard of the broken promises and shattered dreams of ordinary New Zealanders. Thousands of New Zealanders out there have lost everything and Mark Hotchin’s mansion on Paritai Drive stands as a symbol of greed and all that was wrong with the finance company sector. 
As I also mentioned I am hoping that New Zealand icons like Colin Meads and Richard Long—their brands are irrevocably damaged at the moment—and other New Zealand icons will think twice before they lend their names to areas that they have no competence in. 
This travesty of the finance companies has resulted in increased ill health and a decrease in the well-being of a huge cohort of New Zealanders. Last year I spoke about two people I know about—and no doubt there are a hell of a lot more—who committed suicide as a result of losing all their money in these schemes. That is why this bill is so important. 
We must remember that not all who acted in an unscrupulous manner were operating out of the back of a tin shed. We need to pass this bill. I commend it to the House. The days of the Wild West are gone. This bill closes a lot of these loopholes. It is a fantastic bill supported by both sides of the House and certainly supported by me. Thank you. 
Bills read a third time.