STAFF PAPER ON AUTHORISED FINANCIAL ADVISER COMPETENCE

Introduction

1. The purpose of this paper is to outline current developments and possible approaches in relation to standards of competence for authorised financial advisers ("AFAs") under the Financial Advisers Act 2008 ("the Act"). It has been prepared by Securities Commission staff to inform not only the Commission itself (i.e. the Commission in its capacity as a statutory decision maker) and the Commissioner for Financial Advisers, but also the Code Committee, financial advisers and their employers, consumers, education providers and other interested parties. In turn we seek comments to help provide a more complete picture of current developments and possible approaches.
2. To the extent that views are expressed in this paper they represent the preliminary thinking of Commission staff.
3. Much of this paper is descriptive - setting the scene for a discussion. First we give an outline of how the Act relates to the competence of AFAs. Within that outline we draw attention to the various distinct roles of the Commission, the Commissioner, and the Code Committee. We then go on to outline the National Qualifications Framework and the development of unit standards of competence for financial advisers. The last section of this paper is the beginning of the substantive discussion on a competence framework for AFAs under the Act.
4. The intention is for this paper to lay the groundwork for consultation processes and decision making in relation to competence matters. In particular, we are keen to ensure that, ahead of the Code Committee's consultation process on the competence standards to be specified in the Code, there is a good level of understanding of the National Qualifications Framework in order that feedback can be provided to the Code Committee for early consideration.
5. We are keen to fully understand and assess the financial and other implications of the possible approaches set out in this paper. We ask you to comment on costs, benefits and any other impacts (for example the effects on competition or on trans-Tasman business efficiency). We are seeking both quantitative and qualitative information. We encourage you to describe any alternative approach you think would achieve the Act's objectives. We are keen to hear from you on any other issues you consider important.
6. Submissions should be sent to the Commission by 5.30pm on 29 May 2009.

Email:

faa.consultation@seccom.govt.nz

Post:

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Latest Comments

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FMA outlines its latest expectations for advisers

Paul Flood: The danger is that the 'goalposts' (regarding what is acceptable or unacceptable adviser conduct) may be susceptible to change. Our 'Principles based' legal/regulatory environment lends itself to “prevalence-induced concept change” over time, perhaps not so much in the written laws and Code, as in the interpretation of the prescribed principles.

1 day ago Steve Wright

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FMA outlines its latest expectations for advisers

Just a tip, if you use more than six, six letter words in a sentence you lose most Kiwi's. So avoid client/adviser confusion when writing your post or article if you would like it read and understood. Ironically, my last sentence was not likely read.

1 day ago Backstage

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FMA outlines its latest expectations for advisers

All things said are great aspirational goals for a great financial advice industry, it mirrors what both the legislation and the code requires. However, like most things discussed it talks about what's expected not how it's done. The hardest aspect of financial advice today isn't what it is, it is how it is done. The how only comes from those that have done it, the how is only provided with examples. Guidance documents that spell out what's required along side how it it done. We’re still dealing with the same issues we started with in 2021, figuring out the how. And figuring out the how in every advice business is consuming resources that could easily be shortcut by the FMA demonstrating what they are expecting. It's not about “do it this way” its about this is the sorts of things we’re looking for. In the absence of standards and expectations, guesswork prevails. That represents significant risk to FAPs and the result is onerous overcooked advice processes for multiple advice operations and undercooked she’ll be right for single operators focused on getting the work done. Both approaches have potential for harm and as its been said earlier, leaves advisers open to explain they haven't been speeding with the authorities have pulled them over. The advice industry needs guidance on the how we know the what already.

3 days ago Jon-Paul Hale

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Who is responsible for notifying policy changes?

Sticking an oar in, while we have “service” requirements the expectation that an adviser is responsible for discussing said change is relying heavily on assumption. 1. That the client hasn't moved and contact details haven't been updated. It happens more often than many think. 2. It assumes there is a servicing agreement in place to provide service. Remember the requirement is to scope service not provide it. A client deciding to have ad-hoc service on their request is a legally valid position to have. 3. If there is a service agreement that's realistic to what is expected, how long does the adviser push the issue to have the discussion before moving on with everything else they have to do? Again, a point that is not clear in the guidance to date. The challenge of the present rules is the adviser is responsible for ensuring the client understands the advice provided. How do you ensure you're covering this if a client doesn't engage despite genuine attempts to manage it? There's still a lot of “what if’s” in this whole are we’re only going to have clarity on once someone is taken to task about it. But first we need to have clarity on what ongoing service actually is, because right now demonstrated by the direct providers a letter once per year with a please call if you want to discuss is the current minimum…

3 days ago Jon-Paul Hale

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FMA outlines its latest expectations for advisers

To correct errors in my previous post: "policies, templates, and controls" should read "policies, processes, systems and controls", and "is more conductive" should read "is more conducive".

4 days ago Paul Flood