KiwiSaver advice ‘isn’t rocket science’
Questions have been asked over whether unnecessary hurdles for advisers are preventing consumers getting access to advice on KiwiSaver.
Friday, April 20th 2012, 6:44AM 
10 Comments
by Niko Kloeten
The issue has been raised with the Financial Markets Authority by a Registered Financial Adviser, who spoke with Good Returns on the condition of anonymity.
The adviser thought he had all the required qualifications to become an Authorised Financial Adviser, only to discover that he only met the criteria for becoming a “category two” AFA.
Category two AFAs are unable to provide advice on category one products such as KiwiSaver; in order to advise on KiwiSaver he would have to also complete a paper on ‘portfolio design’.
The adviser, who said many of his clients were on modest incomes, questioned why advisers had to learn portfolio design in order to help people pick a KiwiSaver scheme.
He said he just wanted to be able to advise on KiwiSaver and provide budgeting advice; if clients wanted a full-blown investment plan he would refer them to a financial planner.
“KiwiSaver isn’t rocket science; it’s actually quite simple. As an RFA I can advise on a million-dollar life insurance policy but I can’t help someone with KiwiSaver; there’s a double-standard there.”
The adviser said before the regulations his business was “about 99% risk, with a little bit of KiwiSaver advice on the side”, but now many of his clients were missing out on KiwiSaver advice altogether, due to being unable to afford the services of an AFA.
“An AFA isn’t going to drive out to South Auckland in the middle of the night to help someone with their KiwiSaver for $40.”
Niko Kloeten can be contacted at niko@goodreturns.co.nz
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Comments from our readers
On 20 April 2012 at 8:26 am Fred said:
Anon raises a really good point; one where regulation may be lessening the quality of advice to investors.
Maybe diversified KiwiSaver funds ought be Category 2.
That noble South Auckland KiwiSaver almost certainly does not want a 6-point, voluminous Statement Of Advice either.
On 20 April 2012 at 1:22 pm MPT Heretic said:
Clearly you could benefit from further education Anon RFA because your role as an investment adviser is not to pick a KiwiSaver scheme. If you don't understand that best stick with Risk. Just because the current model does not pay for good financial advice does not mean any contributors should have to settle for a poor substitute. Plenty of investors in "simple" finance co debentures will attest to that. On 20 April 2012 at 2:05 pm Headmaster said:
The current (and experimental) adviser regulations are unquestionably disadvantageous to the consumer. They tend to direct consumers towards financial planners and their ilk, the very people who recommended and sold Bridgecorp, Hanover and other finance company debentures by the bucket load.
KiwiSaver ought to be re-classified as a category 2 product. It is an already highly-regulated security, and subject (at product level) to more than adequate protection and oversight.
Expand KiwiSaver's adviser base to RFAs, and lift the average quality of advice given in the process.
On 21 April 2012 at 10:56 am Sensible said:
Great article and yes, if the 10 credit investment paper has been completed then it makes no sense to do a paper on Portfolio Design simply to assist a client in selecting the appropriate KiwiSaver fund. Never mind a million dollar life cover, just look at the complexity of income protection. On 23 April 2012 at 7:37 am MPT Heretic said:
Headmaster I think you will find more than a few advisers who are now classified as RFAs placed their clients into fin co debentures. As did many clients all by themselves without any 'help' from advisers.
Regulations at a product level for KiwiSaver will not stop investors losing plenty of wealth through making bad decisions.
On 24 April 2012 at 10:10 am GOLFNUT said:
I am an AFA and more than happy to provide KiwiSaver advice to clients, though I do agree with the anonymous RFA about the advice process relating to it. It is a highly regulated product, which NZ needs. The Government is keen to get as many Kiwis as possible enrolled for obvious reasons. Having to jump through all the hoops that are required by the FMA will make more advisers either avoid K/S, because it is so poorly remunerated, or try to fiddle the system by implying to clients that they should limit advice to K/S only and confirm it with disclaimers. Many clients do come in and want to sign up to KiwiSaver, but are reluctant to go into other issues, or wish to discuss K/S as part of a retirement planning exercise. The want to save, but mostly want the freebies and many are reluctant to provide additional information. I am good at what I do, but I am not inclined to put pressure on a client, who is an ordinary working stiff, so that he walks away.
We need the new standards of professionalism in the industry, but I sometimes feel that we are taking a hammer to crack a nut and demanding that every product needs the same level of regulation. I am not implying that you should be able to buy it like a supermarket item, but KiwiSaver is a no brainer, should be compulsory and should not require the overburdening advice regulation criteria which currently exists. The only advice issues that should be required are in attitude to and tolerance of risk. In this sense, we advisers have a huge education job to do because of the abysmally poor financial awareness of the majority of Kiwis.
On 25 April 2012 at 9:12 am denis said:
I agree with your client scenario, GOLFNUT. People know when they are being "upsold" to because it happens all the time, wherever they go.
Lots of people join KiwiSaver at work because it means they don't have to engage with a provider or an adviser directly.
On 27 April 2012 at 9:57 am golfnut said:
I agree with you Denis, and the figures showing the number of default fund KiwiSaver accounts is alarming and may be highly detrimental to many younger people over the years. I am part of a business that needs to be financially viable. We have a number of preferred provider schemes, because we made the effort, at the outset, to bring employers on board with the KiwiSaver concept and the social and corporate responsibility for their staff's long term future.
Many of their staff enrol automatically, despite us offering to talk to individuals, and it is difficult to hold seminars for companies to provide generalist advice on things such as risk/reward, the long term nature of investment and the potential difference for a 20 something of investing for growth as opposed to a conservative default fund which involves nothing more than filling in a KS2 form. I cannot justify my company's time spent dealing with each individual, because the Advice process and regulation would put me in breach every time.
I accept your statement about people being wary of Advisers, that is about history and will take a long time to overcome, but does that mean the majority of ordinary hard working KiwiSaver investors have to potentially suffer from a lack of basic knowledge.
I doubt the FMA will ever see it this way, more's the pity.
On 27 April 2012 at 2:25 pm denis said:
The way I see it, the workplace enroller gets into KS in the same easy way that a retail investor sets up a simple cash deposit account at a bank. And I think that's fine.
Over time, they might consider going into aggressive/growth funds but that has to be an individual's informed decision - with or without an Adviser.
I think some of the moves to get young people automatically into growth funds early on has theoretical merit - but assumes too readily that the wider public are tolerant of volatility and will universally accept that a -10% return in a growth fund is, at times, completely OK. I don't think we are there yet.
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If an "adviser" is unable/unwilling to qualify to provide financial advice (despite the KiwiSaver amounts appearing minor), then they should stick to their core business.