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Category Two advisers can be authorised - now

Financial Advisers Act legislative changes were unanimously passed in Parliament yesterday which means the draft Code of Conduct can now be finalised, providing certainty at last for financial advisers.

Friday, June 25th 2010, 12:03PM 4 Comments

by Jenha White

Code Committee chairman Ross Butler says the draft Code is being developed on the basis that regulations to be promulgated under the Act will allow category 2 product advisers such as mortgage brokers and life insurance advisers to voluntarily opt into the authorisation regime.

Chair of the Select Committee Lianne Dalziel said yesterday at the second reading of the Bill in parliament that "inadvertently we had prevented them [category 2 advisers] from registering or becoming authorised financial providers because the Securities Commission would not have the power to grant them that status, because they are ineligible, not advising on a category 1 product."

Dalziel says she spoke to the Minister's office and it was realised that if better standards were to be encouraged within the industry as a whole, then it would not want that to be the case.

"I did not think it was intended to be restricted in that way, but I understand that the Supplementary Order Paper now addresses that issue."

Commerce Minister Simon Power says he has instructed officials to look at the issue of category 2 advisers seeking authorisation very closely in order for an announcement to be made within the next few weeks.

Butler says he also appreciates that the legislation outlines that the Code will be used as the benchmark for entities and groups seeking to become Qualifying Financial Entities.

Next week the Code Committee proposes to publicly release an updated version of the draft Code.

This document will take into account the latest legislative amendments, and will reflect the consultation input the Code Committee have received from many advisers and organisations.

The Committee will then initiate a final series of quick, targeted consultation opportunities, for consumers, advisers, and organisations to submit on any new or outstanding matters from 8 July to 16 July. This activity will include public forums, meetings with the Committee, and the opportunity to provide formal brief submissions.

Butler says the Code Committee's objective is to have a draft Code available before the end of July for formal presentation to the Commissioner for approval.

He acknowledges that there has been uncertainty around the Act, the Bill, the Supplementary Order and the Code.

"The release of our draft Code next week, the quick, final consultation process, and the formal presentation of the Code, will provide you with the ability to confidently plan and execute the role you will play in the new regime," he says.

 

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

« ANZ moves away from managed fundsKiwiSaver mismatch a 'huge challenge' for advisers »

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Comments from our readers

On 25 June 2010 at 12:29 pm Giles Thorman said:
So often during this somewhat tortuous process I have thanked the Gods that Ross Butler has been there to inject some down to earth common sense in what has been at times a debacle, the above yet again illustrates this. I feel sure Ross this Industry needs you there for some time to come, from this particular Broker, a very big thank you.
On 25 June 2010 at 12:58 pm Bazza said:
Sanity at last!
I am glad to see some common sense applied at last. The issue was that there are people who only advise on category two products who do give Financial Advice as well. Their Advice is no less important than the advice given by investment advisers or Financial Planners. On the other hand there are also brokers who sell category two products who don't give Financial Advice, other than on product, they should be registered and no more. Having the option is the best way to go in my opinion as there is no one size fits all.
On 25 June 2010 at 4:42 pm Vern Mardon said:
I fully agree with Giles regarding our industry friend Ross Butler. Ross is indeed a beacon for our industry and history will show what a strong positive advocate he has been for us. Like Giles I also hope that Ross is involved with our industry for some time to come, but for more selfish reasons. It will keep him away from my fishing spots in Tasman Bay leaving plenty of fish from me!
On 1 July 2010 at 3:37 pm Dennis said:
I'm interested in Bazza's comments about those who sell mostly risk (category two) products and also give some investment products advice eg (KiwiSaver). I deal with a lot of average clients who dont have $500,000 to invest but who want to do the best with their plans to put 2% or 4% of their $40-$80,000 p.a. salaries into the right portfolio for their retirement.They want to protect their mortgages and their modest incomes with Life, Trauma, TPD and Income cover. And there are lots of people in this category, more than those with big lump sums to invest. I understand that if I mention one word that can be construed as advice about choice of portfolios then I have to do some three-day workshop and get a 70% pass mark so I can qualify as an AFA and pay around $1,100 just to register (not sure what I get for my $1,100). Looking through this Investments Concepts Manual I see I have to understand all about "Inverse Yield Curves" and "Coupon Securities v Discount Securities" and "Correlation Coefficients" and "Arbitrage" and "Standard Deviations" I could go on but my client is already screaming "Stop!! I just want to know which portfolio to choose at my age and can I change it in future years?" There are a lot of customers out there that dont want rocket science, just simple concepts and a look-me-straight-in-the-eye reassurance that you will put their interests first. I think the bureaucrats have lost their way in providing robust protection for the majority of the population. The stress of compliance will drive many honest, experienced advisers out of the business and the general public will be no better served. Surely there can be a simple pathway for older advisers to stay in the business doing what they do well without having to become fully trained financial planners. Integrity,listening to your client and common sense used to work well. What happened to it?
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