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Commissioner takes final step, and issues stern warning

The Commissioner for Financial Advisers has taken the last formal step required for the introduction of the new financial advisers regulatory regime by gazetting the Code of Professional Conduct for Authorised Financial Advisers.

Thursday, October 28th 2010, 4:39PM 12 Comments

Commissioner for Financial Advisers David Mayhew says it is an important milestone for the implementation of the new regime.

"This confirms that Authorised Financial Advisers will be a reality from December 1. From that date advisers giving personalised investment advice to retail clients will be able to operate within the new regime designed to promote the sound and efficient delivery of financial advice and to encourage public confidence in the professionalism and integrity of advisers," he said. 

He also noted that from December 1 all financial advisers will be subject to the statutory duties to exercise care, diligence and skill and not to engage in misleading or deceptive conduct.

At the same time, the Securities Commission has approved the standard conditions for incorporation in the authorisation of AFAs.  Those conditions provide the framework for the regulatory relationship between the individual AFA and the Securities Commission, for example, in relation to reporting obligations.

Submissions on the proposed standard conditions will be published by the commission shortly. 

Mayhew sounded a note of caution about the readiness of the majority of financial advisers to engage with the new regime. 

"While the Securities Commission will have in place a licensing process for advisers who want to be AFAs by December 1, too few are currently getting on with the registration and assessment steps necessary for authorisation.  There is a real risk that delay now will create a log jam next year," he said.

The Commission has previously said that, provided advisers applied for authorisation by 31 March 2011, the Commission should be able to complete the process by the critical date of 1 July 2011.


"But that assumes significant numbers have already been processed before March 31", Mayhew says.  "The experience to date has been disappointing and, unless there is more engagement now, there may be insufficient capacity in the system to cope with the volume of applications to be processed in the last three months before the regime is fully in force."


« Disclosure regulations approvedAFAs have to disclose remuneration, but not RFAs »

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Comments from our readers

On 29 October 2010 at 8:16 am disgruntled said:
David Mayhew has implied (rightly in my opinion) that the new regime will price all but the wealthy out of the personal advice market. I'm guessing many advisers are reluctant to have to sack many clients they have helped and built up relationships with."Here is a mountain of compulsory new paperwork for you and here is the huge bill that goes with it" The rule makers seem to think that this is a good thing, though lord knows how. How does this meet Code Standard One ? (Best interest of the client)In addition they have not even told us yet about the double dipping fiasco for sole advisers using a company structure - end of the month wasn't it. Procrastination seems a normal response.
On 29 October 2010 at 9:09 am Mr Adviser said:
The Government seems to have the expectation that the majority of Advisers want to be an AFA.

Advisers are saying No, We are not interested in being an AFA, and I suspect many will not complete the Level 5 Certificate either, choosing just to register.

The Govt has made a complete hash of the whole process from day one, which has upset the majority of Advisers, and caused them alot of frustration, confusion and to lose focus in their work.

Can't blame them for taking the RFA route, as they just want to focus on doing some business.

Maybe if the Govt had put together it's own Code of Conduct together in being Professional, in how it dealt with this issue, there would be a different outcome?

What do you think?
On 29 October 2010 at 10:08 am John said:
Well said Mr Adviser. As a mortgage broker I would probably have opted to become an AFA if this whole process had been handled a hell of a lot better than it has. It's symbolic of the in-depth inefficiency of government departments & regulatory bodies in NZ that this turned into an absolute shambles. Regulation for financial advisers ended up being more about making money off advisers to fund bureaucrats and their back office jobs than its original intention of improving advice standards to clients. Anyone who disagrees with this needs a reality check! I agree that most advisers will wisely opt to become registered as opposed to being authorised and get back to focusing on their businesses instead. Someone should write a book on this whole saga!
On 29 October 2010 at 5:07 pm John Honest said:
The naughty school boys are not up to speed with their homework and Master Mayhew is shaking his cane at us threateningly. Rather than play his little game I think we should all wag school and settle for RFA status. I only need AFA status to sell KiwiSaver and I'm in two minds about that given that the Securities Commissioner, Master Dale-Jones is threatening to strap anyone who hopes to make a bob out of it. He has unfinished business with KiwiSaver regarding his stated desire to take his knife to the fees.

Another thing about the AFA requirement is that it is age discriminatory. For many senior advisers the educational hurdle is just too high for them to jump and they are exiting the industry earlier than they otherwise would, taking a wealth of experience with them, leaving the underserviced NZ insurance market in an even worse state.
On 29 October 2010 at 6:53 pm PM said:
Absolutely agree with all above comments. How to make a complete hash of something? Get a whole lot of bureaucrats to organise it!!
The problem is that the people leading this don't know and probably still don't know exactly what we do.
But it sure is a gravy train for all and sundry and all in the name of 'restoring confidence!!! It seems to me that all those who destroyed the confidence have got off scottfree.Bluechip??
Another frustrated adviser.
On 30 October 2010 at 7:30 am John G said:
I have just retired after 46+ years in Financial Services. I could not be bothered with all the Red Tape in having to Qualify at my age & with a claim free record. It has been interesting to note that several Qualified Advisors, have cost their Clients $$$$$$$$,during the past 3/4 years. The new Legislation is not going to stop the Cowboys, as this has proved true in OZ & UK. So good luck to you all,have fun with the Compliance.
On 31 October 2010 at 6:04 pm Reality check said:
Anyone who has sat the Level 5 courses will know they will have no impact on advice quality, so lightweight are they. Of particular note is the health insurance exam, completed by most in under 15 minutes. At the same time, advisers will know they are shelling out substantial sums, including having to register and pay twice with FSPR. Candy floss qualifications and no benefit to anyone, least of all clients. What a waste of time, but good for employment in Wellington.
On 1 November 2010 at 10:37 am Majella said:
RFA seems to be a the simpler path, if you're only dealing in risk. Forget the wrinkles of savings & investment management and the double-cost of AFA. Still, why not complete the Level 5 paperwork anyway? Completion is hardly challening, and having spent the, one can be 'qualified' for AFA but carry the RFA badge.
On 2 November 2010 at 9:35 am w k said:
Wondered what will happen if no advisors signed up with a dispute resolution provider and register themselves either as AFA or RFA? Just curious.
On 2 November 2010 at 9:40 am w k said:
And btw, I haven't sign up anything yet, just in case, there are some more changes at the last minute (who knows?).
On 12 November 2010 at 9:19 pm Richard Amery said:
Me too- after 40 odd years as insurance agent and investment adviser, having never had a complaint or any client lose any money (I mainly sell personal superannuation balanced funds and look after retired people on a trail commission basis)
I have just sold the business- Would have been nice to carry on, but I can afford to retire comfortably and just don't need all this c***.
I am going fishing, so have fun, you lot!
On 17 November 2010 at 9:29 am dbl adviser said:
I would suggest that most advisers are sick to the back teeth of the long and windy road changing direction so often. This is worse than Windows upgrades. Are there a bunch of software geeks running our legislative processes? We are a married couple he looks after Insurance I look after Mortgage. We've split our business to operate under two company names to separate the two sides in view of one day maybe selling one part. This would mean that we would have to register 4X. OMG WTF is that about. There's only two of us in the business and here we are facing corporate size compliance bills. The safe option for most is to to hold off until a few goody two shoes advisers have tested it and got burned then complained then the process changed to 'not let that happen again' Ha. What a joke. Have those clods in Wellington not yet understood that advisers do the minimum required to get the fish heads off their back so they can get on with the job that they have joined this industry for.
Commenting is closed



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