Cosgrove Clayton: Financial Service Providers (Pre-Implementation Adjustments) Bill — Second Reading In Committee 
Text is incorporated into the Bound Volume 
Cosgrove Clayton: Financial Service Providers (Pre-Implementation Adjustments) Bill — Second Reading In Committee 
[Sitting date: 22 June 2010. Volume:664;Page:11957. Text is incorporated into the Bound Volume.] 
Hon CLAYTON COSGROVE (Labour—Waimakariri) 
: 
 I join with colleagues in noting that the Financial Service Providers (Pre-Implementation Adjustments) Bill especially in the current climate—even in the last 72 hours—is extremely important given that large amounts of money invested by a large number of people in a variety of companies and entities over a year or so has been put at risk and lost. We see on television from the latest saga regarding ANZ and ING (NZ) and the rulings that have been made that there is a lot of angst within the community. We can understand it when people’s life savings are invested in good faith in respect of the advice they receive. When it turns to custard they lose those savings. At best in one case reported last night the payout may be 6c or 10c in the dollar. 
For me this bill is interesting because it strikes at the heart of what consumers and the community can expect which is a high degree of professional standards in respect of conduct and in respect of advice. It is quite simple in my view: if people are purporting to promote a product or provide a service or advice they should be qualified to give that advice or produce that product. More especially they should be in a position where they stand by that advice and they are prepared to put their hand up and be accountable in respect of their conduct around it. Obviously there is a difference between providing advice on what sort of product one should buy—what sort of computer or washing machine if you like—and the more fluid environment in terms of providing advice in respect of investments and financial services. We have a thing called a market and it moves and does strange things as it has done in the last 2 years at least. 
I am mindful of a bit of a correlation between this situation and a favourite subject of mine which is real estate agents. We went through a similar debate about standards of performance standards of conduct and standards of advice and about people standing by their work their advice and their conduct. I will not get into that area because it is not exactly on point with this bill but I am mindful of the correlations and similarities. The vast majority of people in the real estate industry are good folk who stand by their work do a diligent job and provide diligent advice but there were issues about a minority. The issues were whether they were qualified and had the professional skill to provide advice and conduct their work. 
Greater risks exist I think in the financial area than in the real estate area. With real estate we have a tangible asset bricks and mortar. In the financial sphere of operations we have a market that moves and does strange things and it is more difficult—a bit like trying to nail a jelly to a wall—when sifting through a financial collapse to determine who is accountable. We then have to go to the tertiary level if you like and make a connection in terms of those who have given initial advice to investors to give something a go and in terms of trying to ascertain whether that advice was given in good faith and with professionalism and whether people are prepared to stand by it. 
The difficulty we face with any legislation is that we are not writing legislation for the vast majority of practitioners who would adhere to best practice—whatever that is—whether or not there was a law but for the minority. We are writing legislation for the minority who purport to be professionals purport to give advice at a professional and qualified standard purport to have skills and then when it all turns to custard—in large part thanks to their advice—cut and run. That is not unique to the financial sector. It happens I think in all professions. My colleague Clare Curran ran through a few. Even in those professions that consider themselves to be quite lofty we have seen people err in terms of both standards of professional conduct and advice. 
It has been noted that Labour contributed in large part to this bill with the passing of twin pieces of legislation establishing the new financial advisers and service providers regime in 2008. We were mindful of the environment that existed then. I note in passing that this bill has been slow in its progress. I do not make that comment as a political point; I simply note that given that even in recent days we have seen further uncertainty around financial services in a variety of entities I think the communities will welcome this bill. It will now move through the House relatively swiftly. I think they will look to this legislation for some degree of protection. 
The final point I make is that I think there is also a responsibility within our communities. There is an old adage: if it looks too good to be true and it smells too good to be true often it is too good to be true. It is a bit like going into a casino and expecting to come out with more money than one went in with. Well the house always wins. I think that there is a duty and an obligation both on legislators in this House and Government and on our communities to improve financial literacy. I do not mean any disrespect to those in our community. People go into financial arrangements in good faith. They believe folk. People go and see lawyers to do their house conveyancing because they are professionals. People believe that because lawyers are qualified things will go right. When people walk into a doctor’s surgery very few of them look up and ask to see the certificate on the wall as proof that the doctor is a qualified general practitioner. We take it as a given. I think that as we go into the future there has to be a greater effort to improve our financial literacy within our school system starting with the young and going right through to our adult population. I am a layman in this area myself. It is a big jump for people from doing their household budget getting their finances right and making sure their taxes are all sorted to then being asked to make judgments about where to put their life savings. As I say the sniff test is that if it looks too good to be true it generally is. 
I think some support needs to be put around this regime in the future to provide financial education and further financial advice for laypeople in our communities and to assist them by ensuring that they have some confidence. When a layperson goes into a professional’s office he or she often feels a bit intimidated because the professional is a sort of “Flash Harry”. The layperson may not want to ask the questions; more important he or she may not know the questions to ask. I think that is where some sort of educational regime in the consumer affairs space could be supportive of this legislation.