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Different approach to definition of adviser mooted

The Institute of Financial Advisers is querying the extent of the regulation of advisers being proposed by the government, but says that, since the government is intent on a more regulated market, a very different approach than that proposed by officials should be adopted.

Tuesday, October 3rd 2006, 7:18AM

by Rob Hosking

Officials proposed an escalating level of disclosure and other regulation for four categories of adviser: Information only, execution only, product marketer and high level.

IFA says in its submission to government that there should be only two categories: those who give advice; and those who do not give advice, but provide information and execution only.

These definitions are based on those used by the Australian Securities and Investments Commission.

It has "major concerns with any proposed regime that attempts to define financial advice by reference to financial products, titles of financial intermediaries, or to employment status."

It recommends that “financial advice” be regarded as a process of interaction with consumers in a way that influences them to do something, (or in some cases, not to do something), that could have an impact on their current or future financial situation.

The IFA does not accept that financial advice is necessarily related to the sale of a financial product.

Also IFA has come out strongly against firms setting up their own Approved Professional Bodies, arguing, amongst other things, that the relatively small number of advisers who are left will be forced to join small APB’s with little economic strength to be able to set and enforce standards, and with much higher entry and annual membership charges."

The Institute is still querying the need for such over-arching regulatory change as is being proposed.

“There is no reference anywhere in the Final Report [of the Task Force on Financial Intermediaries] to any hard evidence of major concerns.

“Even when the Task Force sought input from consumers about negative advice outcomes they had received, the response to the well-advertised and promoted request was deafening in its silence.”

Rob Hosking is a Wellington-based freelance writer specialising in political, economic and IT related issues.

« Financial planners finally get a ceoSovereign takes regulation bull by the horns »

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