Voluntary AFAs 'ahead of the game'
Advisers who have become authorised even though they don't need to have made a smart career choice, according to Institute of Financial Advisers president Nigel Tate.
Wednesday, April 25th 2012, 5:08PM 10 Comments
by Niko Kloeten
There are several types of Authorised Financial Adviser, including Category 2 AFAs, who must follow the AFA code of conduct but are unable to provide advice on Category 1 products including KiwiSaver.
This means they can't advise on anything beyond what a Registered Financial Adviser can, but they are held to a higher standard than an RFA on the advice they provide.
Tate spoke highly of those who have taken the path of voluntary authorisation, saying it will increase their professionalism and put them in a good position if the current regulatory requirements for advisers are ramped up at some point in the future.
He said making such a choice indicates "commitment to the profession", given it involves higher costs and liability than remaining an RFA.
"It's a real credit to those that have done it - professionally it's the right thing to do and I think they are getting ahead of the game.
"The IFA is encouraging people to, rather than having to respond or react to regulation, be ahead of it."
An increase in the minimum requirements for advisers is almost inevitable at some point, but when that will happen will depend on the political climate, Tate said.
"It is the IFA's view that over time there will be a need for a closing of the gap between authorised advisers and registered but not authorised advisers."
A knowledgeable source told Good Returns the Category 2 AFA designation came about "quite late in the development" of the Financial Advisers Act after lobbying by insurance advisers.
"They [insurance advisers] had embraced the whole thing and wanted to take the step up in professionalism but the Act was changed so most of what they did didn't require them to become an AFA."
Niko Kloeten can be contacted at firstname.lastname@example.org
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