by David Chaplin
Investment Savings and Insurance Association chief executive Vance Arkinstall says that the Commerce Minister, Simon Power, had indicated the government would amend the Financial Advisers Act (FAA) to clarify the definition of 'agents' covered by QFEs.
Arkinstall said the FAA amendments would probably also extend the range of products QFE advisers were able to deal in. Under the original legislation, QFEs were only to be responsible for employees who sold products issued by the QFE itself.
"Under the current legislation QFEs were only to cover employees but we understand they will be able to include agents and financial advisers providing the organisation accepts responsibility for the actions of the advisers [under its control]," he said. "We expect there will be a broadening so QFE agents and advisers can sell products issued by other organisations."
Arkinstall said only institutions with strong balance sheets would be able to meet QFE standards as they would have to demonstrate the ability "to put things right" in the event of a successful consumer complaint.
Peter Leitch, Professional Advisers Association (PAA) chair, said while increasing the powers of QFEs may create a more "structured process" that could come at the expense of consumer choice.
"The intention of the legislation was to protect consumers but [under the proposed QFE changes] there may be less choice for consumers who won't have access to products as suitable as they can get now," Leitch said.
Lyn McMorran, Institute of Financial Advisers (IFA) president, said the industry body also had a "few reservations" about the proposals to beef up the QFE regime.
"If the QFE can cover agents and advisers why would anyone bother to authorise individually when the cost of compliance could be met by a QFE?" McMorran said. "It's concerning to us - [the proposals] could wipe out independent advisers... While there would be huge benefits for manufacturers."
A spokesperson of the office of Simon Power told Good Returns "the Minister does not propose to comment at this point on what particular issues will be covered" by the FAA amendments.
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