Hughes sees new dawn as ‘win-win’ for all

If the new adviser regulatory regime – which comes into effect today – produces commercial and competitive advantages for compliant advisers and QFE’s “that's a win-win for everybody”, according to Financial Markets Authority (FMA) chief Sean Hughes.

Friday, July 1st 2011, 6:58AM 5 Comments

by Benn Bathgate

Speaking to Good Returns just a few hours before the start of the new regime, Hughes said his hope was that, "consumers are better served with access to better qualified advice, properly supervised individuals, and those in the market themselves get the opportunity to hold their badge up and say it was worth the cost, it was worth the investment in time and now we have something that distinguishes us from those who frankly could have got their qualifications out of the back of a Weetbix box."

He dismissed fears that regulation could lead to a reduction in the number of financial advisers, citing his experience working with the Australian regulator a decade ago.

"I had exactly the same arguments then when I was working with the ASIC (Australian Securities and Investments Commission) and was part of the team responsible for implementing the FSR (Financial Services Reform) regime over there, exactly the same arguments, we'll make it uncommercial for people to run advisory businesses, we'll squeeze out good advisers, the end game will be the consumers deprived of the very thing we want them to get," he said.

"The reality is that has not happened and do you know what's happening in Australia today? More people going into financial advisory businesses. . . I'm not saying we have to mimic everything that's done in Australia but the same arguments were heard and answered there."

Hughes said that as of Thursday night, there were just over 1,600 AFAs, 4,000 RFAs and 63 QFEs employing around 20,000 employees able to give advice, "not bad numbers for a population of about four million people."

And for any advisers not registered but tempted to continue operating he had a warning.

"For people operating on the perimeter and being cynical about the application of law and waiting to see if they get found out, well, [they're due] a nasty surprise."

Benn Bathgate is a business reporter for ASSET and Good Returns, email story ideas to benn@goodreturns.co.nz

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Comments from our readers

On 1 July 2011 at 3:31 pm Andy said:
I still see a shortage of advisers able to give good advice to the people of NZ who are not prepared to pay for that advice for one reason or another. If the aim of the legislation is to make good advice available to everyone, it has clearly failed. I agree - it has got rid of some of the bad advisers, but it has also got rid of some good ones too - good ones that gave advice for free on the perimeters of their core business. This advice was given and the cost subsidised by their other business. Kiwisaver is a classic example. It seems also that mortgage brokers cannot even be pro-active for their clients and recommend a savings plan to save the deposit for their house. This must be referred to a bank.
On 2 July 2011 at 1:01 am Forthright said:
Today a colleague suggested I compare the FMA list of Authorised Financial Advisers with the FSPR entries for several advisers in my area. In a number of cases the FMA website is saying these advisers are authorised but the FSPR list is saying, this person is a registered financial adviser but NOT an authorised financial adviser. The wording is in a lighter shade than the other wording.

The shocking revelation is that according to the FAA2008 an adviser isn’t an AFA if the FSPR doesn’t say they are an AFA. Therefore I wonder how many advisers inadvertently broker the law today due to the FMA and FSPR not being on the same wave length. I suggest all AFA’s check their FSPR listing to make sure it doesn’t report those awful words “registered financial adviser but not an authorised financial adviser.”
On 4 July 2011 at 1:27 pm Concerned Advisor said:
I see that Sean is continueing his role of opening his mouth and seemingly saying the first thing that comes into it. He thinks the Broker numbers are good numbers?? The 20,000 Employees of the QFE's the vast majority of these will not be able to give advise as they have never done so, they are administarators and underwriters etc. Originally we were being told there would be 10,000 AFA's, there are less than 20% of that number; all up (with RFA's added) 56% of the original target. I know of 3 good experienced Brokers to date who have left the Industry local to me. But not to worry Sean and his sidekick Mel are out there ready to give any and all a "nasty surprise", or as Mel told us the other week she had the big stick out. When are we going to hear from the FMA... we want to help you all adhere to the new standards, we want to lift the quality of advise given to the public, we want this to become a better Industry. All I have heard for the last year is threats and more threats and ever changing rules.
On 4 July 2011 at 1:37 pm Concerned Advisor said:
I see that Sean is continuing his role of opening his mouth and seemingly saying the first thing that comes into it. He thinks the Broker numbers are good numbers??
The 20,000 employees of the QFE's the vast majority of these will not be able to give advise as they have never done so, they are administrators and underwriters etc.
Originally we were being told there would be 10,000 AFAs, there are less than 20% of that number; all up (with RFAs added) 56% of the original target. I know of 3 good experienced Brokers to date who have left the Industry local to me. But not to worry Sean and his sidekick Mel are out there ready to give any and all a "nasty surprise", or as Mel told us the other week she had the big stick out. When are we going to hear from the FMA... we want to help you all adhere to the new standards, we want to lift the quality of advise given to the public, we want this to become a better Industry. All I have heard for the last year is threats and more threats and ever changing rules.
On 5 July 2011 at 9:22 am Anon2 said:
I've said it before - this is how govt operates. They start off with the good guy approach and get everything up and running. Then the good guy gets the can and they bring in the tough guy - saying we always said we were going to hang you.
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