Advisers snared in door-to-door sales crackdown
Proposed new regulations, which formerly targeted door-to-door salesmen and now look to have a much broader application, could have huge implications for financial advisers and product providers.
Thursday, May 10th 2012, 9:09AM 
17 Comments
by Niko Kloeten
And according to a financial services law expert, there seems to be little recognition in the industry of the potentially far-reaching consequences of the proposed changes.
Chapman Tripp partner Tim Williams said section 71 of the Financial Markets Conduct Bill, which deals with "unsolicited offers", could result in Authorised Financial Advisers and QFE advisers being allowed to approach only their existing or former clients with offers of financial products (including KiwiSaver).
"The proposals would prohibit offering financial products during or "because of" unsolicited meetings, except in certain prescribed situations. Meetings are extended to include phone calls and electronic communications.
"The current proposal in relation to AFAs and QFE advisers is that they can approach, telemarket to or email only their existing or former clients. Under the current proposals, RFAs and "information only" salesmen can't approach anyone (other than people in trade) to offer them financial products.
"It's got the potential to curtail or regulate significantly the ability to market financial products," he said.
"If an adviser was at a trade fair, it would be fine if people go up to the adviser, but the adviser could not approach people as they are walking past. Telemarketing financial products would also be prohibited unless it became a regulated activity."
Williams said despite the potential ramifications of the proposed rule, there doesn't seem to be much awareness of the issue among the financial services industry.
"I don't think this point has been fully appreciated by the industry, maybe because there is an expectation that the regulations will allow for further sensible relief when they are issued."
Niko Kloeten can be contacted at niko@goodreturns.co.nz
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Comments from our readers
On 10 May 2012 at 10:46 am Mac said:
If I made an unsolicited call to a potential prospect to explain or offer my services as a financial adviser, I assume that this would not come under the proposed legislation as I would not be offering a "product"? On 10 May 2012 at 12:33 pm w k said:
As I've said before, the regulation is so badly written, two person can 100% agree what it actually meant or want, and you will get more than one legal opinion.
Ban and struck-off pushy / dodgy advisers by all means, but if the interpretation given in this article is correct, the public will continue to be under insured, and it will decline even further.
To the regulators, remember this saying "insurance is sold, not bought". If the saying is wrong, ask yourselves, how many of you ever rang an adviser to buy an insurance policy? And lastly, wondered who would want to be an adviser with these restrictions?
On 10 May 2012 at 12:56 pm Dirty Harry said:
If Mr Williams is right, then I look forward to the amendments; which there no doubt will have to be. Come on IFA, insurers, ISI, et al, make your submissions! On 10 May 2012 at 4:28 pm w k said:
1st line is meant to read " ... no two persons .... "
@mac: You've got a valid question. What if the prosecutor was to ask "what services are you providing?" And you say insurance or financial advice. Then he asked, "then who pays for your services?" I stand corrected here, most advisers are not fee based and remunerated by the provider of the product they sell, therefore, couldn't you be construed as trying to sell a product? Hey, I can be wrong, and who is to say the authority cannot try to charge you for that? You may eventually be not guilty of any wrong doing, but who is the big loser and who could be making money at the end of it? Answer is obvious isn't it?
On 10 May 2012 at 4:37 pm w k said:
Submissions? To whom? errr ......... you mean to the Regulators? NICE TRY buddy. On 11 May 2012 at 8:31 am Anon said:
Submissions closed 26 April.... On 11 May 2012 at 10:26 am Andrew said:
w k - Even what appears to be perfectly clear legislation can result in at least two legal opinions. If it didn't, what would lawyers do? On 11 May 2012 at 12:33 pm Lindsay said:
What a positive move towards professionalism. We have all been claiming to be true professionals. How many cold calls have you had from a Dentist, Lawyer, Doctor offering their services - none. But of course these are recognised as professionals. On 11 May 2012 at 4:06 pm w k said:
It will be interesting to know how many professional advisers actually sits in the office all day, like the dentists lawyers and doctors, never have to make a single cold call and have clients queuing up to see them one after another? Maybe the saying was wrong that "insurance is sold and not bought" On 11 May 2012 at 4:24 pm Mark Jory said:
I was certainly not aware of this proposed legislation which is blatantly crazy as any financial adviser would agree.
Insurance is sold, not bought, is so true, particularly with respect to getting more than the bare basics.
The banks would no doubt love this legislation as it removes so much competition. As they already have bank account holders, they can market to hundreds of thousands of existing clients.
The legislators and politicians DO need to ask themselves when they last approached a financial adviser for advice? Probably never.
And how we are different from Lawyers and Accountants is that individuals have a legal requirement to seek advice form those professions, and for Doctors and dentists they suffer significant pain and health risks but not seeking advice.
If they don't seek financial advice, they don't know, what they don't know. They may think $150,000 of life insurance is sufficient because that is the size of their mortgage, but without advice, they haven't considered the consequences a significant illness might have on their ability to work and earn an income.
This proposed legislation is ridiculous and has the potential to seriously harm the industry, but worse to significantly harm individual New Zelanders through under-insurance and foster an ongoing lack of financial literacy.
On 12 May 2012 at 2:04 am Wayne Cotton said:
We have some pretty stringent regulations in Canada, and more on their way. Most are overcome or negated with a professional, consumer-driven low tension approach. When a happy, satisfied client formally introduces an adviser to a new person through a proper Prestige Introduction, there is a natural transference of trust. Then the adviser meets with a prospective client for a 20 minute discovery preview and uses a self-discovery questionnaire as a quality control check for the benefit of the consumer. The prospect is able to quickly identify their "present negatives" and discussion priorities. The approach is changed to a legitimate service without any product or service pitches. The "sales interview" is removed from the sales interview and prospects feel completely comfortable, as they are in control of the outcome. The natural result is that the traditional approach process is reversed. The approach is made by a concerned prospect to the adviser. All the "pitchy" sales stuff that turns consumers off quickly disappears and the issues regulations are trying to control are no longer an issue. There is a better way. Contributed by Wayne Cotton. On 12 May 2012 at 2:35 pm Neil Smith said:
For many sales people, the point of such calls is to gain time for a coffee or tea appointment to "qualify the prospect".
The government thinks we're the ones that need qualifying!
There are many approaches one can use and telephone is just one of them. But for some advisers, and in the past, myself included, the whole point of the approach was to make a time to "qualify them".
That's what we need right? We don't want to be wasting their time, or ours.
Well it appears that according to the government, they think that is wrong!
It appears that government thinks we're the ones that need qualification, and they are introducing more and more legislation to tie us down and gag advisers, so to speak, while we are qualified by the prospect!
It might appear that we're only allowed one arm out to offer our Prescribed Disclosure Statement, so that the prospect can window shop us, and compare.
"This one is a QFE and has this dispute resolutions scheme. This is with ISO, and is an RFA. Hey here is one that is an AFA, I wonder what services, oh, here, he only does risk. What on earth is risk anyway?"
And so it goes on!
But what if there was another way? What if they could qualify themselves?
Perhaps we need to think along that line. It's worth thinking about anyway.
There is absolutely no doubt, the way consumers find and engage with advisers is changing, and some people need to stand up and lead the way through this maze of reactive regulations and legislation.
On 12 May 2012 at 5:31 pm Lindsay said:
And I am going to make a 2nd comment
Who cold calls - Insulation, tree cutting, double glazing, power saving and Religious fringe and it seems financial advisers still want to. People insure their car, house business etc without a cold call. Why do they need an unsolicited cold call to insure their life, income, health ? Funny only the big commission things
On 13 May 2012 at 9:25 am Andy said:
What would happen if an adviser broke this law and provided a new insurance policy and that new client then had a claim (death for example)? As well as the adviser getting a severe telling off and ridiculously large fine, would the client’s family have to repay the policy claim and return themselves to poverty?
I think the insurance companies themselves should be more worried than us, and THEY should be doing some pretty heavy lobbying!
On 14 May 2012 at 9:30 am Al said:
While I just specialise in investments, a few years ago I did have an Insurance Specialist sharing office space. He was in his late 20's and I can't recall him ever cold calling. He seemed to be kept reasonably busy dealing with phone calls from Lawyers and Accountants every day, either on new or business in progress. He also spent reasonable time running sessions to educate Pro's and clients.He would never have any concerns about this Bill. On 14 May 2012 at 11:24 am Tim Williams said:
To the relief of some of you - the proposals relate to financial products (as defined in the FMCB), which do not include pure risk insurance. The proposals relate to investments type products - equity, debt, derivatives and managed investment schemes. On 17 May 2012 at 5:46 pm Mark Jory said:
Where can we find the list of financial products this applies to?
Under the Financial Advisers Act, financial products are split into two categories, with category 1 being investment products only, and category 2 products being everything else.
Lindsay (above) clearly has no understanding of the difference between home, car, and contents insurance and life, disability and health insurance. I wonder what levels of cover he has if he has never been approached by financial adviser, and who he has the cover with?
Commenting is closed
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