Phil: How not to do it

An accurate and timely summation of the current shambles which is serving nobody.

The complete lack of understanding being displayed by the Minister and his advisers is truly breathtaking. In a week when the Brits have announced yet more 'fundamental' structural changes to their regime, it seems that NZ politicians are impervious to the expensive lessons of our overseas counterparts.

Raising the standards and competence and knowledge of advisers involved in complex and critical financial decisions facing consumers is a laudible and proper objective. So why on earth is AFA status being abandoned for risk, mortgage, and Fire & General advisers? Does the Minister seriously believe that only investment decisions are difficult, complicated, and problematic? Why not encourage all advisers to reach increasing standards of knowledge and competency?

It's fairly simple.

If risk, mortgage, or general insurance advisers wish to present themselves as competent in their speciaist field - just like investment advisers - why prevent them from doing so? It would be perfectly reasonable to designate a qualified investment adviser
AFA(I), a qualified risk adviser AFA(R), a qualified mortgage adviser AFA(M),and a qualified general insurance adviser AFA (G). Those with proven and tested competency in more than one area are merely designated AFA(RMGI) or similar.

This attempt at regulation has descended into a time-wasting dance of futile ineptitude conducted by those who haven't the faintest concept of the theory, purpose, or practical aspects of regulation.

The suggestion of promoting enhanced competency will not eliminate poor advice or advisers, but at least a line is drawn above which qualified advisers can present their credentials, subscribe to accepted standards of professional behaviour, and promote the cause of serving the consumer more effectively. The mechanism for testing competency is already in place and the latest set of proposals is a nonsense.

Remember when some random sage or other suggested that the Aussies were casting an envious eye on our regulatory ideas? Only cause for envy in Australia at present is for the All Whites recent result in the Football World Cup. Maybe Ricky Herbert could do a better job than the current political management team in charge of regulation in NZ - he surely couldn't do any worse.

I have to agree with your query as to what is this legistration trying to achieve.
It appears to be a knee jerk reaction to the losses in finance companies. But didn't the majority of investors invest direct without using an investment adviser? I can't find anywhere in this legistration where it states that a person can't invest unless they use an investment adviser. So how can it help them if they don't have to use it?
Also do we really need a new qualification "AFA" when we already have qualifications such as "CFP" and "CLU" to show that an adviser is qualified to give advice?
So what is the purpose of the legistration? (Apart from creating more bureaucracy and public servants creating more jobs for public servants)

To try and understand some of this mess, it's first worth standing in the shoes of the architects.

The Politicians are desperately attempting to demonstrate to their constituents that there is positive change in the unregulated financial services industry. In their haste, the Politicians have attacked the issues without adequate understanding, resources or knowledge – resulting in continual shifting-of-the-goalposts, and all round frustration.

In many ways it would be beneficial for a Dictator-styled approach to be adopted, whereby the rules are announced, the rules are set, and debate is entered into after the event. Whilst there will be some who will be disaffected by this approach, at least the industry will know where it stands and will be able to adjust accordingly. Unfortunately we will continue on the merry-go-round for some time, attempting to appease the interests of all parties involved.

Sigh

To expand further on the notes of David Whyte (above):

If we are to adopt a rules-based-approach to regulating the financial services industry (which by-the-way will be recognized as futile in years to come, and will revert to the more practical principles-based-approach), then the advisory community should attain accreditation for the areas of expertise that they wish to represent.

If your business is mortgage broking – then you must demonstrate (initially and on an on-going basis) to the Regulator that you are proficient at providing this service at the required level. The same exists for other composites of financial services.

If the Regulator had any sense (sigh) then they could adopt this approach quickly and without ostracizing any of the financial services participants.

Phil & David, you miss the point completely. The point is why should insurance advisers & mortgage brokers be lumped into the same category as investment advisers? Sure upskill & show yourself more competent but do not say we have the same ability to destroy a customer as investment advisers do!!

What caused this Act to come into existence in the first place? It was investment advisers placing customer's money into bad investments &/or taking the funds and fraudulently using them.

How can an insurance adviser or a mortgage broker do that?

We never touch customer's money! We give options on what products they could take & then do the legwork to put their decision into place.

Yet if we were to be included in the Act & required to become an AFA under this regime we could be penalised to the same extent as investment advisers when the risk is, if not there at all, at least minimal.