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[OPINION] Proposed two-tier system has major flaws

IFA Manager, Member Learning & Development Andrew Gunn says the FAA proposals have some laudable aspirations however it has a major loophole which benefits QFEs.

Tuesday, July 19th 2016, 5:01PM 2 Comments

by Andrew Gunn

The Review’s final report has some laudable aspirations to provide better access to financial advice and reduce complexity.  The sad reality is that clients of advisers will probably not understand the distinction between ‘adviser’ and ‘agent’ any more than they did between AFA and RFA and QFE adviser.

As DC Whyte points out there well could a flight of advisers into ‘agency world’ to avoid the very real issue of the adviser’s personal (and legal) liability.  Why not reduce your business risk by transferring liability to the financial advice firm?  I know many lawyers would advise this.

No doubt the 6,500-some RFAs will have to get qualified over time, or prove via the tried-and-true NZQA process of Recognition of Priority Learning - their competency in the ‘prescribed courses which will be deemed to comply’ (page 71). 

This process is yet to be determined by the Code Committee – but surely the Code Committee won’t overlook the current vocational pathway for AFAs - the newly developed NZ Certificate Level 5 in Financial Services with its eight industry strands (including banking).  

This fit-for-purpose qualification was the extensive work of the TRoQ process of Skills Org and NZQA.

However, very worryingly, MBIE have specifically allowed a loop-hole for the training of ‘agents’ through ‘FMA-approved internal training programmes’ (page 71)!  QFE’s are not NZQA-accredited training providers nor will they ever be.  This internal training is undoubtedly at ‘potentially less cost’ as MBIE phrase it on page 71 – but who will moderate and quality assure this?  

This is a large rod for the Code Committee and FMA’s backs as they take on a role they have no educational competence in nor resources for.  It by-passes a perfectly quality-assured system!

The only sure result of this regime is that the 24,000-odd ‘agents’ will gain an internal training certificate not worth the paper it’s written on. 

In educational-speak:  there is no ‘portable qualification’ – and denies them a major personal asset on their CV!  In my time on the Industry Training Board I’ve seen many other sectors show their lack of vision and commitment to qualify their people – but it does surprise me that these loopholes are contemplated in the high risk area (to consumers) of financial services. 

This MBIE loophole runs counter to the NZ Tertiary Education Strategy and the Industry Training Act.  I wonder if Skills Org (the ITO for financial services) will provide MBIE an analysis of the long-term impact of this lack of formally-recognised qualification for the 24,000 QFE employees?   

QFEs, let’s face it, have deep pockets and are the one group who can afford to qualify their staff appropriately!

Ironic it is they who have been offered this loop-hole.  MBIE may be unwittingly setting up a two-tier system of qualification system in financial services; NZQA for the advisers and the more nebulous ‘internal training programme’ for all others. 

It’s not a legacy the Minister Goldsmith may have been warned about and the MBIE rhetoric of the ‘even playing field’ (on page 62) is severely breached with this concession.

Andrew Gunn is the Manager, Member Learning & Development at the Institute of Financial Advisers.

Tags: financial advisers Financial Advisers Act IFA

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Comments from our readers

On 19 July 2016 at 5:18 pm Murray Weatherston said:
Finally IFA shows some balls. Hallelujah. Well done Andrew and Fred.

When we met MBIE post review publication, we said we thought this loop-hole sounded like something we had heard AMP were very much in favour of. But we opined we didn't like the chances of a 3 person adviser firm in Eketahuna being able to scamper through it - they didn't have a dog's show.
On 20 July 2016 at 6:28 pm NormanStacey said:
There are already too many dodgy practices by QFE's - including Agency Contracts that require AFA's to subjugate Code Std 1 for 3 years if they sign.

Now Industry skill standards risk fissure if QFE's are enabled by MBIE to propagate different ethics.



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