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Advisers given more time to comply with new regs

UPDATED 2: Financial advisers have been given some more breathing space to comply with new regulations. (Includes comments from IFA and ETITO)

Wednesday, April 28th 2010, 9:57PM 11 Comments

Commerce Minister Simon Power has announced that advisers will be given extra time to fully comply with the new financial advisers regime.

While some deadlines remain in place he has extended others. The changes have been made in response to feedback from the industry.

All financial advisers will need to be registered and to have become a member of an approved dispute resolution scheme by December 1.

However, they will then have until June 30 next year, when the regime comes into effect, to complete any required training and have applications for authorisation and qualifying financial entity status processed by the Securities Commission.

 "I have listened to the concerns of the industry about the importance of their being enough time for individuals and companies to go through the authorisation and education process.

"The industry has advised me this will give sufficient time for these elements to be completed.

"This regime is essential if we are to have a financial adviser sector which mum and dad investors and investment product providers can have confidence in."

Power said he expected to make further announcements soon on the treatment of advice to wholesale clients, generic advice often issued by institutions rather than individuals, and how the regime deals with group corporate structures. 

ETITO Manager Strategy and Corporate Relations Michael Frampton says that financial advisers cannot delay meeting minimum standards of competence, knowledge and skills as required by the Code because of the extension in the deadline.

"Financial advisers need to see this extension as an opportunity to address any knowledge and / or practice gaps they might have," Frampton says.
"ETITO's self-evaluation tool has been used by nearly 900 advisers and indications are that nearly half of advisers are not ready for competence assessment."

"Advisers cannot postpone satisfying the requirements of Code."

"If they do not register with ETITO, plug any gaps in their competence and book assessment early, they still leave themselves open to the risk of running out of time. Advisers who book and undertake assessment early will almost certainly have the opportunity for a re-sit should it be required. The same cannot be said for those who delay."


The Institute of Financial Advisers (IFA) has welcomed the  decision to extend the timeframe for registered financial advisers to gain their qualifications.

IFA president Lyn McMorran says its members have been feeling pressure to meet the timeframes between the Financial Service Providers Pre-Implementation Bill being passed and the Code coming into effect in December. 

She says there is a definite need for some transitional arrangements to ensure financial advisers can enrol and complete their qualifications in time for the Code to come into effect."

Some of the unit standards proposed by the Code Committee as the minimum standard for authorised financial advisers are to be assessed via examination or completion of The National Certificate in Financial Services (Level 5) while others will need to be reviewed by an assessor, for example workplace evidence of good advice practice.

McMorran says the extension is not an invitation for advisers to delay seeking assessment and obtaining the qualifications required to become a qualified financial adviser.

IFA is still concerned about the large influx of registrations the regulators are expected to receive prior to the financial adviser registration cut off date of 1 December.

Power reiterated that financial advisers will still need to be registered as a financial adviser by 1 December in order to continue practising, but the IFA is concerned that the agencies involved in registering and authorising advisers could be overwhelmed.

"The regulators say that while they have a good grip on the numbers of financial advisers in New Zealand, there are still a large number of financial advisers who do not belong to a professional body or who have not yet identified themselves as being affected by this regime so it's still difficult to tell what the volume of applications for registration is likely to be," McMorran says.

"Therefore the numbers seeking registration before 1 December could far outweigh the numbers anticipated causing backlogs and delays in registrations, leaving many advisers unregistered by the time the regime comes into force."


Q & A's

  • What will financial advisers have to do by December 2010 to comply with the regime?
    All financial service providers, including financial advisers, will have to be registered and be a member of an approved dispute resolution scheme. Financial advisers will also have to have submitted their applications for authorisation (or in the case of a QFE, have submitted their applications for QFE status) and started undertaking any training necessary.
  • What will Financial Advisers have to do by June 2011?
    Financial Advisers wanting to provide financial advice on securities or wanting to provide financial planning services will have to have completed all necessary training and be authorised by June 2011. Similarly organisations seeking QFE status will have to be approved by June 2011. Any entity or individual wanting to provide advice after this time will need to do so in full compliance with the law.
  • When will the Financial Service Providers (Pre-Implementation Adjustments) Bill and the Code of Conduct for Financial Advisers be finalised?
    It is expected that both the code and the bill will be finalised by July this year. Once the regime is in place, it is expected that advisers will be able to begin engaging more actively with the regime.
  • How will the ‘pathway to compliance' impact on other financial service providers?
    Financial service providers who do not provide financial advice will need to be registered and be a member of an approved dispute resolution scheme by December 2010. If a financial service provider is not registered or has not become a member of a dispute resolution scheme by this time, they will not be permitted to continue providing those financial services.
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Comments from our readers

On 29 April 2010 at 7:57 am Sharon Taylor said:
I think you mean June 2011 in the second question above??!!
On 29 April 2010 at 8:50 am Philip said:
Yes, it was an error in the original release from the minister which has now been corrected. Thanks.
On 29 April 2010 at 9:22 am Geoff said:
Overall this is good for the industry, as more people can now complete their requirements, and good to know the Minister is listening to those of us giving him advice. Thanks must go to the Associations & Groups who have been lobying hard to have some concessions here.
On 29 April 2010 at 9:41 am bw said:
Honestly, this is turning into such a circus. There are a myriad of issues - one though - some "person" has determined that higher qualifications will cure the cultural and ethical problems within the financial advisory industry - which is clearly wrong at the point where tertiary level degrees etc are being required. Salient education and enforcement of duties is desired - the blunderbuss of tertiary education is nonsensical (and this from someone with honours and masters degrees). To compound the error, we are now forced to delay the new regime by a further 6 months in order to allow the ridiculous qualifications to be undertaken. In the meantime the advisors remain unregulated, and clients without recourse. All the while, we divert attention and resources into developing another set of laws which presumably will remain just as inoperable and unenforced as the existing laws.
On 29 April 2010 at 11:01 am Mike said:
It seems to me that there are acouple of issues - for the industry to kove forward we all need to embrace regulation and in its current format it is not too onerous but like most things timeliens are being set before the groundwork has been done - typical "political" thinking of making a show of getting things done to "please" the public whilst actually not achieving what is needed!
The other issue is not just getting Advisers through this process but also managing the birth of a new [and expensive] industry called Compliance Management - heaven knows what that will turn out to be but if it is anything like what is happening off-shore HELP!
So good on the Minsister for taking a realistic and practical step and good luck to all dvisers now on the regulatory road and to the public - this is NOT a cure all, you still need to make decisions based on what you feel is best for you - so continue to question and listen to you own gut instincts!
On 29 April 2010 at 12:22 pm regan thomas said:
He BW: Is your business for sale then?
On 29 April 2010 at 1:18 pm Ron Flood said:
In reply to BW. There has been no six month extension to the regulations. The extension only gives individuals time to comply with all requirements. There will still be a requirement for all advisers to be registereded on Dec 1st, and belong to an Approved Disputes Resolution Body. There appears to also be a requirement that advisers complete an application to become authorised before Dec 1. If they have not fulfilled the above requirements by Dec 1, they will be unable to give advice.

The only requirement being extended, is the need to be fully authorised.

In all other areas, advisers will be need to comply with the Code requirements from Dec 1.

Clients will have recourse from Dec 1, this is the reason all advisers have to belong to an approved scheme.

For those out there having a dig at the professional bodies, each and every one of them has been working hard to ensure their members have sufficient time to meet the regulatory requirements. This extension is required to achieve that goal.

Finally, advisers belonging to professional bodies have for years been subject to the client care and ethical requirments now being propossed in the Code. Errant advisers within these organisations have beed fined, expelled or censured accordingly. Now that all advisers will be required in law to exhibit the same ethical behaviour and be seen to act in the client's best interests, consumers will be better served.
On 29 April 2010 at 3:10 pm Murray Weatherston said:
Can someone please enlighten me as to how a financial adviser who needs to be authorised can register as a FSP before they are authorised.

Relevant law is s 13 (c) of Financial Services Providers (Registration and Disputes Resolution) Act.

That says a person is qualified to be registered as a financial service provider ... in the case of a person who provides or offers to provide a licensed service the person is a licensed provider.

Giving financial advice on category 1 products and/or providing a financial planning service is a licensed service. The licence required is authorisation.

On 30 April 2010 at 7:37 am david whyte said:
To follow on Murray's request, how does someone new to the industry obtain authorised status? You cannot give advice until authorised, and cannot gain authorisation until 3 client files containing evidence of competent advice are presented for scrutiny? Catch 22!
On 30 April 2010 at 11:05 am bw said:
To Regan. Sure, if you have a law degree and a NZX license.

To Ron. Remeber we were originally going to have to be FSP registered and have dispute resolution in place by June/July 2010 - that's been pushed out to December 2010.
On 30 April 2010 at 3:52 pm Bazza said:

You can be a registered adviser working under the supervison of an AFA so you can build up your 3 client files for your portfolio of evidence. not that hard really. Infact I think these types of apprenticships will be good for the industry.
Commenting is closed



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