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Govt plans to regulate the finance industry

THE Government is looking at regulating the burgeoning financial advisory and mortgage broking business.

Financial planners, insurance, share and mortgage brokers are all coming under the spotlight in a review of ways to regulate the sector ordered by Commerce Minister Margaret Wilson.

Mrs Wilson unveiled plans to set up a taskforce to look at options for the sector.

The minister said she had an open mind about regulation, but the aim was to raise the standard of financial services in an effort to enhance New Zealanders' financial security.

The taskforce has been charged with researching options on regulation, from self-regulation through to a full licensing system. The review will also look at the way the Australian sector is regulated.

Phillip Matthews, chief executive of the Financial Planners and Insurance Advisers Association, said it was potentially the biggest shake-up in living memory for the sector. It was not regulated at present and there was a perception it needed to be.

"There's a perception that there's a problem... but no one has ever defined what the scope of the problem is. I don't think there is a large perception among members of the public that financial advisers are rip-off artists who need to be regulated."

But Mr Matthews thought it "entirely appropriate" the issue was properly researched and considered.

Mrs Wilson said she had been "routinely" told by the finance sector that it did not want an Australian approach. However, the system across the Tasman would have to be looked at as part of the Government's pledge to move toward a single economic market.

She also pointed to a recent International Monetary Fund report on New Zealand which scored the country poorly in respect of regulation of financial intermediaries.

Mr Matthews said the Australian system for financial services was too heavy-handed.

"If that was brought in to New Zealand, it would significantly decrease the level of advice and put people out of business."

The Government aims to look at reform of the sector by the middle of next year.