Controversial commissions paid by financial institutions to investment advisers for promoting their products will be abolished voluntarily before the government regulates them, an industry body says.

Investment Savings and Insurance Association chief executive Vance Arkinstall said under a new regime investment houses, banks and superannuation funds would stop paying commissions on any investment product including KiwiSaver.

The new policy will be signed off next week, but it could be up to 18 months before the change takes effect for some.

Instead of a commission being deducted from customers’ investments, often without their full knowledge, investors would negotiate a fee directly with their adviser.

Commission-based sales by supposedly independent advisers have always been open to criticism, Mr Arkinstall said.

The above excerpt from a news article just goes to show how far from being in touch with the real world the Financial Planning fraternity is.

The real people who need financial Planning advice, you know, the ones who don’t have hundreds of thousands to invest but would like to will not be able to afford Financial Planning advice.

When this occurs they will turn to the people who will give them advice, just like they did in Australia.

Who are those people you ask?

Those are people like Blue Chip and the like, property spruikers who will tell you that an over priced, expensive property that they have just developed is the perfect solution for retirement savings.

All I can see from these new reforms are Financial Planners providing the service to already wealthy clients and every body else being left to the sharks.

Today the average house price in NZ is $350,000 compared to $6,639 in 1960.

Today the average wage in NZ is $41,000 per annum or approximately $791 per week or $19.79 per hour.

So what does this mean if you are looking at buying a house.

It means this… to buy the average house in NZ if you are on the average wage in NZ you would need to work 17,680 hours to pay for the average house.

This is almost three times more than what was required in 1960.

This is based on a 40 hour week, and not allowing for spending or taking into account interest.  This equates to 8.5 years

In 1960 the average house price was $6,639 with the hourly wage rate of $1.05 and to pay it off would take about 3 years according to Bernard Hickey of interest.co.nz.