The Wild West is alive and well in the financial services world. That's a statement sure to upset everyone from policymakers to one-man bands selling insurance and investments.
But the reality is that the person in the street is at risk of being mis-sold to with everything from car loans to $2million investments.
Laws such as the Credit Contracts and Consumer Finance Act (CCCFA), the Financial Advisers Act (FAA), Financial Markets Conduct Act (FMCA) and others have upped the ante against the cowboys.
Yet an insurance sales person can quite legally call him or herself an "adviser" and switch clients' policies from one insurer to another en masse to qualify for a trip to Las Vegas, leaving the customers with policies not worth the paper they're written on. Nice trip, however.
Our financial services rules tend to focus on funds management and advice for investments such as shares and bonds. It's good, but is it enough?
This week the Financial Markets Authority (FMA), which shares regulatory responsibility with the Reserve Bank and Commerce Commission (ComCom), released a shocking report on the way many life and "personal lines" (trauma and income protection) insurance sales people go about their business.
The FMA found that of the top 1100 life-insurance advisers, 200 have a "high rate of replacement business". That means, in plain English, many advisers are shopping their clients to a new insurer every two years to get another bite at the commission cherry. Sometimes they invalidate their clients' cover as a result.
Of course, even more are sound advisers who do the best by their clients. But many clearly don't, putting commission and perks ahead of their clients' best interests.
In its research the FMA found these high-churn advisers were between 2.2 and 8 per cent more likely to switch a client's policy if the new insurer offered a free overseas trip over and above commission.
In its report the FMA said: "During the review period, advisers were offered trips to destinations such as Shanghai, Prague, Las Vegas, Hollywood, Rome, New York and Rio de Janeiro as sales incentives by life insurers. The high-replacement advisers took an average of two of these trips each."
One took 10 in four years, which he could only qualify for by moving large numbers of clients from one insurer to another. Ride on cowboy.
And these people can call themselves "advisers", which suggests they're working in the best interests of their clients.
The FMA counts 34,200 advisers on its books. Only 1800 of those are "authorised", meaning real advisers who have to put the clients' interests at the heart of their advice by law.
The rest are salespeople. They are required to exercise "due care, skill and diligence" in providing services and are prohibited from misleading or deceptive conduct. But as the FMA's example above shows, the client doesn't have to come first.
The law that allows this is under review and the completion of that process is imminent. Hopefully the FAA review will strip salespeople of the nonsense title that lulls consumers into a false sense of security. Having said that, there is a vocal group of interested parties arguing to maintain the status quo.
The other ludicrous distinction in our laws is "Category 1" and "Category 2" financial products. Life, house, motor vehicle and other insurance are Category 2 products. Yet, if mis-sold, even a car insurance policy that doesn't pay out at claim time could bankrupt a person.
In one recorded sales call that I've listened to, the salesperson presses the Wellington-based customer to reduce the sum the family home is insured for from $688,000 to $250,000. The most probable reason for this was to lower the sum premium, clinch the sale and get commission.
Imagine the financial pain in that household had the house been destroyed. Yet insurance doesn't need to be sold with the same care as an investment of the same size.
Russell Hutchinson, managing director of Chatswood Consulting, who advises to the insurance industry, says it would be fair for that homeowner to believe he or she was receiving financial advice.
The law says otherwise.
Investment property is another area where salespeople masquerade as advisers.
One firm's sales materials says these "advisers" can offer an investment consultation report or a tailor-made investment strategy, but are in fact working to get commission on whatever property they just happen to have on their books.
There are other loopholes in the laws. The National Business Review's Tim Hunter pointed recently to an oversight in the FMCA related to companies that provide consumers with foreign-exchange trading "advice". This "advice" is excluded from the law. Yet to the unwary, it could sound like an "investment" in the same way as a fund or share purchase.
"Wholesale advice" to high-earning or -net worth individuals is another shocker. Advisers don't need to meet several code-of-conduct standards for these "wholesale clients" if they earn more than $200,000 or have $2 million in net worth. Just because someone has made big money building bridges or selling widgets, they don't necessarily know much about investing.
The catch-all the Fair Trading Act, which is policed by the ComCom, mops up some of the poor behaviour by financial services providers such as banks, insurance companies, financial advisers or anyone else providing services. But the ComCom doesn't investigate on behalf of individuals and there is a lot of muttering in the financial services world that it's not given enough money to really go after the baddies.
I asked Fair Go's Gordon Harcourt if New Zealand was adequately regulated. What really concerns Harcourt isn't the laws, but the enforcement of the rules. He sees many cases where offenders get off scot free.
"It's about the will and the resources to enforce what is there," says Harcourt.
He argues that the ComCom needs greater resourcing and a greater will to prosecute. "Often investigations fizzle out or end in a warning letter."
Individuals with complaints about financial service providers can have their cases investigated by the dispute resolutions services, which include the Banking Ombudsman, Financial Services Complaints Limited and the Insurance & Financial Services Ombudsman.
Yet research by the Banking Ombudsman found that only half of respondents had heard of the complaints scheme.
What's more, financial advisers who do find themselves under investigation by one of the dispute resolution services can voluntarily deregister from the Financial Service Providers Register and walk away, one of the dispute resolution services told me this week.