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Over 3,300 mortgage & insurance brokers can’t voluntarily become AFA’s

Mortgage brokers and insurance advisers are being excluded from the opportunity to become authorised financial advisers (AFA's) after  last minute changes to the Financial Service Providers (Pre-Implementation Adjustments) Bill.  

Tuesday, June 15th 2010, 5:19PM 7 Comments

by Jenha White

It was announced in last Friday's Select Committee report that mortgage brokers and insurance advisers who only advise on category 2 products will no longer have the option to be authorised.

ETITO manager of strategy and corporate relations Michael Frampton says over 3,300 insurance or mortgage advisers have enrolled in training for the National Certificate in Financial Services [Financial Advice] [Level 5] for the purposes of authorisation.

He says ETITO  is seeking clarification from the Securities Commission on the matter.

"We do understand the concern and confusion expressed to us by those mortgage and insurance advisers who have made the commitment to the qualification based upon their intention to become authorised and who are now uncertain about how, or whether, to proceed," he says.

Frampton urges concerned advisers to contact their professional association or seek guidance from the Securities Commission.

The New Zealand Mortgage Brokers Association (NZMBA) chief executive Darren Pratley says he is disappointed by the decision as many advisers may wish to become AFA's by choice.

"The Bill fails to provide the Securities Commission with any power to recognise voluntary compliance with the requirements of authorisation. 

"Consumers are losing all of the protection that AFA status provides, and the investment of many advisers over the last twelve months, is being destroyed."

Pratley says millions of dollars have been committed by insurance and mortgage adviser firms with the intention of enhancing the comprehensive service already provided by industry participants, all in the interests of consumer confidence.

Pratley says the overall aim of the Financial Advisers legislation is to enhance the professionalism of the industry and protect the consumer.

"There should not be any restriction on advisers who voluntarily choose to embrace the regime, and Government must ensure that this provision is made within the Bill before it is passed into law."

Asteron general manager risk distribution Peter Conroy says a cat has been put amongst the pigeons.

"It is likely to be disappointing for risk advisers who were planning on taking the opportunity to develop skills and demonstrate their professional capability to clients," he says.

However an insurance adviser who did not want to be named has said the meaning of becoming an AFA has been blurred.

"Being authorised simply means you are under a supervision structure. It does not mean you are more professional or that you give advice of a higher standard.

"If insurance advisers or mortgage brokers want to get the NCFS-5 qualification they can, just as they can get many other qualifications. There are a lot of ways to be a professional."

He says many insurance companies promoted AFA status as professional because they wanted to get everyone across the line, however, regulation is simply there to supervise investment advisers.

 

Jenha is a TPL staff reporter. jenha@tarawera.co.nz

« Code flashes amber, consultation aheadSimon Power pledges solution for category 2 advisers »

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Comments from our readers

On 15 June 2010 at 6:48 pm John said:
It’s a little rich for NZMBA chief executive Darren Pratley to say that the NZMBA is supportive of efforts to enhance the professionalism of mortgage brokers operating within the industry. For the last 7 years that I have operated as a mortgage broker the NZMBA has only been focussed on one thing – itself and growing its membership and annual fee income! The NZMBA did nothing to police the industry of brokers that should not have been operating and when foundation members complained about this their concerns went on deaf ears. For this reason a lot of good mortgage brokers who were foundation members of the NZMBA have never renewed their membership and never will. The NZMBA have used regulation from the start to try and justify their own continued existence in the industry by saying to the powers that be “we represent the voice of mortgage brokers”. By getting into bed with the likes of ETITO and Adviserlink (who by the way clearly have a vested interest in seeing mortgage brokers go through their training programmes) the NZMBA has shown once and for all that it’s only interested in itself and NOT the best interests of mortgage brokers and their businesses. The NZMBA also knows full well that with the government approving the FSCL (Financial Services Complaints Ltd) as the disputes resolution body for the industry the supposed justification of continuing to belong to the NZMBA (it being a disputes resolution body) is simply no longer justified. This is why Mike Pero and Allied Kiwi members have already been told to register with the FSCL and have done so on mass. Mortgage brokers and their businesses get absolutely no benefit from continuing to belong to the NZMBA,now that the FSCL is available. Consumers do not and have not ever recognised membership of the NZMBA as being important when deciding which broker they went to for a mortgage. If Mortgage Brokers want to belong to an association they are far better of becoming a member of the PAA who at least are recognised by consumers and will actually police members when required.
On 15 June 2010 at 10:20 pm Ron Flood said:
Having read the implimentation bill from cover to cover, I disagree that consumers will have less protection. A registered adviser will still need to belong to an approved disputes resolution body, provide a disclosure statement and only operate in areas they are confident, competent and skilled to give advice.

A registered adviser is also required to adhere to the Conduct requirements as outlined in the amendments.

The changes have also given the Securities Commission far wider powers to monitor and inforce the act.It matters not whether you are an AFA,registered or operate under a QFE, consumers are the big winners from this legislation.

The fact consumers will now have a disputes resolution body to lodge complaints with should be a warning to any errant adviser to tidy up their act and start operating in a more professional manner.

No amount of legislation will make us more professional if we continue to allow a small minority to remain in the business whose actions are less than professional.

All advisers should complete their study even if they are not required to be authorised. Their level 5 qualification will be an external confirmation of their knowledge and competence. It is a pity that advisers only started to study with a 'legislative gun' to their heads. It is something they should have started years ago.
On 16 June 2010 at 4:08 pm Confused Punter said:
I have the Bill in front of me and cannot see any wording that excludes mortgage brokers and insurance advisers from choosing to become AFAs. Could someone please direct me to the relevant clauses?
On 16 June 2010 at 6:42 pm fed-up said:
Forced to do this, then forced to do that, time off work, travel, study, seminars, then more seminars, then more seminars with updates,countless emails,and hours reading. What a great waste of time if all you do is catagory 2 products. Then we pay a well established insurance company half of our exam fee's because we have to do do a day course, and now I find out I can't do an exam and become AFA even if I want to! wonder if I'll get a refund even tho I signed a disclaimer recognising it wasn't refundable?
On 17 June 2010 at 10:28 am murray weatherston said:
To confused punter

Read s13B of teh Financial Services Provider Pre Implementation etc Bill that amends s55 of the Financial Advisers Act.

That new section says who the Sec Comm can authorise - and teh list does not included anybody involved with only category 2 products and not involved in investment planning services.
On 17 June 2010 at 4:30 pm w k said:
I think most advisors are confused and not many can interprete the Act. Whoever is in charge, does not seem to understand life & health insurance, fire & general insurance, mortgage, investment & financial planning, otherwise the current situation should not have happened.
If I may say, we, the mentioned practioners, just want to provide our respective services or sell the respective products. Why not just tell us, if you want to just sell life & health insurance, these are the things you need to do, or if you want to do mortgages and investment products, this is want you must do, or if you want to do the whole of lot including financial planning, this is what has to be done. It is actually that simple.
From the feedback I've read, I am not sure if all the advisors understood what the Set A - E and the Category 1 & 2 represents or mean. If you cannot get even the experienced advisors to understand it, there must be something very wrong with it. Is there not someone competent enough to come up with a simple and concise piece of regulation?
What the current piece of proposed regulation is telling you how the clock works, but what we need to know the time.
On 18 June 2010 at 11:55 am Andy Phillipson said:
At long last, our emails, letters, and submissions have been read - albeit 3 years too late. Why couldn't they just listen to us in the beginning? John, I believe I am not alone in agreeing with your sentiments regarding the NZMBA. I found it almost entrapment that we were being coerced into signing up with the FSCL before alternatives had even been considered.
The big question is - Who will clean up the mess, and who will foot the bill? I do feel for the insurance companies who have already outlaid ridiculous sums already to assist in compliance of something that may just not be compliable...
In the end, it will be the clients who will pay - the very people that we are supposed to be protecting! How's that for irony?
Commenting is closed

 

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