Company CEO accepts FMA's criticism
Financial advice provider Aurora Financial Group Ltd has been censured by the Financial Markets Authority in relation to misleading clients over KiwiSaver returns.
The FMA said on Wednesday that Aurora Financial had misled existing and potential clients about the returns of its KiwiSaver Scheme.
The regulator has issued a censure, saying that it was satisfied that Aurora Financial “materially contravened” two market services licensee obligations, sections 19 and 22 of the Financial Markets Conduct Act 2013, (misleading or deceptive conduct, false or misleading representations).
FMA executive director - enforcement and response Paul Gregory (pictured above) said that investors and advice clients should expect to receive “accurate and clear information” to help them make informed decisions about their financial products.
“This is especially the case where potential clients are being asked to make decisions to acquire a product,” Gregory said. “Aurora Financial’s misleading conduct and representations in statements of advice, presented to clients by their advisers are a breach of trust and could erode the public’s confidence in financial advice providers.”
Aurora Financial CEO Simon Rolland said that Aurora Financial accepted the censure, which relates to the Statement of Advice (SOA) available to clients between September 2021 and May 2022.
Aurora Financial Group Ltd (Aurora Financial), which provides advice on insurance and mortgages and KiwiSaver, registered a KiwiSaver Scheme with the FMA in July 2021.
The FMA said that the misconduct related to one-on-one advice sessions held by Aurora Financial between September 2021 and May 2022. During the client sessions and statements of advice, one-year and annualised returns figures were presented in connection with Aurora funds.
These figures were based on the historical returns of the underlying third-party funds into which the Aurora funds would be invested when they launched, the FMA said. It said that the returns figures implied that the Aurora funds “had an established history” when that was not the case. Aurora Financial stopped using the returns figures in May 2022, it said.
Disclosure obligations not met, says FMA
The fine print below the returns figures was “not sufficiently clear or prominent” for clients to understand the returns presented had not been achieved by the Aurora funds, but by the underlying funds, the FMA said.
Aurora Financial did not update or replace the returns figures with the actual returns produced by the Aurora funds once they had launched and short-term return data was available, it said.
Historical returns did not reflect current market conditions
The FMA said that actual returns achieved by the Aurora funds for September 2021 to May 2022 were achieved in different market conditions and were lower than the historical returns presented by Aurora Financial.
“This gave clients the impression the Aurora funds were delivering higher returns than they actually were,” the FMA said. “In the period the returns figures were used, 2,474 Aurora Financial clients joined the Aurora funds of the 4,051 who received the advice.”
The FMA said it was satisfied that Aurora Financial’s conduct was “misleading or likely to mislead” and resulted in it making false or misleading representations.
Aurora Financial responds
In a statement, Aurora Financial CEO Simon Rolland said that the company accepted the FMA’s decision to censure the company for not being clear that the historical returns written in the SOA were achieved by the underlying funds, and for not updating the return information in a timelier manner.
“We take our compliance responsibilities extremely seriously and we respect the role of the FMA in regulating our financial markets to ensure we have a well-functioning financial system,” Rolland said.
Aurora Financial Group has a supportive and open relationship with the FMA and would “continue to do so”, he said.
“At the core of our business model is the fair treatment of all our clients and ensuring New Zealanders have access to quality financial advice that is transparent, easily understood and meets expectations,” Rolland said.
“I can confirm that the returns information from the underlying funds used to illustrate potential investment returns was accurate, and the methodology used to calculate them was robust.”
Rolland said that Aurora Financial did not believe the issue had impacted its clients.
“We proactively updated the SOA prior to the FMA’s review to include a link to the returns generated by the funds,” he said.
A remedial action plan was not required, as advised by the FMA, he said.
“Over the past five years, we have invested significant resources to make sure our systems and processes are robust and fit for purpose,” Rolland said. “We remain committed to continually reviewing and improving our compliance procedures to deliver genuinely fair outcomes for all our clients.“
Rolland told NZ Adviser in April that rising interest rates provided opportunities for mortgage advisers to provide value-add services, such as debt consolidation and KiwiSaver.
Any Aurora Financial clients who are concerned are advised to contact their adviser or the Aurora KiwiSaver Scheme.
