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IFA boss says get rid of RFAs

The two-tier system of registered and authorised advisers is confusing to consumers and should be replaced, according to Institute of Financial Advisers president Nigel Tate.

Tuesday, December 6th 2011, 6:54AM 36 Comments

by Niko Kloeten

He expressed the view during an interview for the next edition of ASSET magazine, which looks back at the major regulatory changes the financial services industry has been through this year.

Asked what he would have changed if he had been in charge of the regulatory process, Tate said he would have taken a different approach to adviser accreditation.

"My pet desire is to get rid of the two-tier accreditation process - I wouldn't have Registered Financial Advisers and Authorised Financial Advisers, just AFAs.

"At the moment it is confusing to consumers, who don't understand the difference between a Registered Financial Adviser and an Authorised Financial Adviser.

"I wouldn't have given lawyers and accountants a free ticket to the game."

Tate said there's technically no such thing as an RFA: "they're really just non-AFAs."

He said it was "way too easy" to become registered, and disagreed the way certain financial products had been categorised under the regulations.

"According to the FMA risk insurance is a simple product much like a term deposit.  Well I would dispute that.

"Show me a simple income continuance policy... the implications of getting it wrong are massive, the cost of getting it wrong is bigger than the policy itself."

Another criticism he had of the regulatory system was that if he and an RFA down the road both gave the same advice on the same category two risk product they would be treated in different ways if things went wrong.

"I'm held to a different standard than they are and that's wrong in my view."

Niko Kloeten can be contacted at niko@goodreturns.co.nz

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Comments from our readers

On 6 December 2011 at 7:51 am Fred said:
Yeah, and make all AFA's QFE's too, so there is 1 standard. Disband the ITO low standards setting bodies and replace with the university-level post-grad diploma.
Simple - and lay-off a caste of thousands.
On 6 December 2011 at 8:25 am Independent Observer said:
Agree - a one size fits all approach makes sense
On 6 December 2011 at 9:12 am Mac said:
Totally agree with Nigel, the RFA designation is a "clayton's accreditation", and I have always assumed that this was a stop-gap measure prior to the AFA designation becoming the minimum qualification for financial advisers. And as for the QFEs...
On 6 December 2011 at 9:24 am Amused said:
Tate says "At the moment it is confusing to consumers, who don't understand the difference between a Registered Financial Adviser and an Authorised Financial Adviser"

Find me ten people off the street who have heard of the Institute of Financial Advisers.....

On 6 December 2011 at 10:03 am Barry Milner said:
I agree in principle with Nigel, a two tier system of qualification is unsatisfactory and whilst we are on the subject I would prefer that we are all designated Registered Financial Advisers because in almost every other occupation/profession being registered is seen as a better level of qualification/attainment than is being authorised.
On 6 December 2011 at 10:11 am Murray Weatherston said:
A starter for 10

Where in any of the legislation is the term "registered financial adviser used"

My feeling is that it is not defined anywhere.

We all have to be registered as a Financial Service Provider under the FSPAct.

As Nigel himself points out, some of us doing certain things have to be authorised as AFA. But if you don't do the things that require authorisation, you don't need to do anything except register as a FSP.

I was interested to read that Nigel believed an AFA advising Cat 2 would be treated differently from say a pure Insurance agent (not required to be authorised).. Surely both are subject to the same EDRS complaints processes.

On 6 December 2011 at 10:14 am w k said:
consumers confused? even some advisers are, so what do you expect? still waiting for the dust to settle after 2 longs years in the land of the long white dusts. over to you FMA ........ out.
On 6 December 2011 at 10:19 am Insurance broker said:
How about just get rid of the need for those giving advice on category two products to have anything? It was the investment advisers who caused all this crap in the first place. They should be required to be AFA's and the rest of us should be left alone to get on with it. Property investment advisers / real estate agents are excluded anyway which makes a joke of the whole thing...
On 6 December 2011 at 10:40 am Ron Flood said:
I often agree with Nigel and know how passionate he is on this issue. I can't however let him get away with stating that "there's technically no such thing as an RFA: they're really just non-AFAs."

I refer Nigel to Section 16 of the Financial Advisers Amendment Act 2010 which replaced S16 of the FAA 2008 which states;

16 Types of financial adviser
Under this Act, there are the following types of financial adviser:
“(a) an authorised financial adviser:
“(b) an individual who is registered but not authorised:
“(c) a QFE adviser:
“(d) a QFE or any other entity that is registered but does not have QFE status:
“(e) any other person (whether an individual or an entity) who is an exempt provider.

A registered financial adviser is in the legislation and is simply "an individual who is registered but not authorised". This is more than just "technically", it is a fact in law.

I would also suggest that any confusion the public may have is perception rather than fact. Clients I have seen over the past year were not even aware there was legislation now in place let alone who has to be Authorised and who needs to be Registered.

It was only after they were presented with my Disclosure Statement they became aware of the situation.

I would suggest that at some time in the future (5 yrs?)all advisers will need to be authorised. Until then we should get on with it and just make sure that the product our client's get is "fit for purpose" and that their interest, and not our's, are put first.


On 6 December 2011 at 11:31 am Mortgage Broker since 1999 said:
AFA and RFA is a good thing, however all RFA's should have compulsory basic training and compulsory on going training credits (this is currently not the case)
If you really want to protect the consumer, then they should seriously look at getting rid of QFE's,
As QFE's can only sell to the consumer what products they have and not always the best product on the market for the client.
On 6 December 2011 at 12:59 pm Amused said:
Well said Insurance broker!
On 6 December 2011 at 4:45 pm Headmaster said:
I entirely agree with Barry Milner's comments. Abolish AFAs and have the single designation 'Registered Financial Adviser'. That would be wholly consistent with other disciplines.

And never accept anyone's assertion or inference that Authorised Financial Advisers are somehow 'loftier' or 'better' than RFAs. They are emphatically not. The AFA distinction is a purely legislative one, prescribed to reign in the excesses of financial planners who were responsible for destroying the wealth of fellow New Zealanders to the extent of billions of dollars. AFAs don’t belong on a high horse, they belong behind one.
On 6 December 2011 at 4:58 pm Forthright said:
Dear Ron, LOL, after reading the latest new business and lapse statistics I can only quote Del Boy about who is putting clients interests first, "you're hav'n a laugh ain't ya."
On 7 December 2011 at 9:42 am Innsie - an RFA and proud of it! said:
Ron Flood - you hit it on the head! Well said.

Everyone needs to remember that from a clients perspective ultimately it comes down to how we all act and professionally deliver product/service/advice - not how many qualifications or level of title one has! Quoted from happy clients ...I have financially guided them significantly better than people that are now AFA level advisers. Reason - here to help clients and NOT get lost in the world of political status!
On 7 December 2011 at 9:53 am Jon said:
This is the first smart thing I have heard from the policing body of the IFA. Seems that they might be interested in the future of the profession after all.
On 7 December 2011 at 10:08 am CJM said:
Wherever you set the boundary you will get issues. If you say only an AFA can give financial advice you still have to define the exact products and services that involves - and then accept anybody can give advice on everything else.

If you define financial products and services widely, you then have to start looking at possible exceptions - jornalists, budget advisors, employers on Kiwisaver, wealthy investors.

You have to deal with issues like can an AFA talk to Strategists, Fund Managers, and Research Houses - or will they all have to be AFAs as well? What about an offshore fund managers presenting to an AFA here - will they have to be AFAs or not come?

How far do we go into the back office. Can an admin person who never deals with clients query an AFA on something they have asked to do or do they need to be AFA to give advice to an AFA?

I suspect you would ultimately get to the same place as now - with a grey area where some people can in some situations give some types of financial advice to some people without being an AFA. That is how life works.

I suspect fixing any oddities in the current regime would be more productive than redoing the whole thing.
On 7 December 2011 at 12:31 pm Brett Condon said:
Clients may know what they want, but that is not usually what they NEED, a good RFA can make a big difference to these peoples lives. Lofty puffed up AFA's who want to make a distinction between RFA's and AFA's, are not helping their clients, just confusing them. Investment clients have been loosing their savings, hand over fist for years, so I don't really think that the pot should be calling the kettle black.
On 7 December 2011 at 12:41 pm Alex said:
well said "headmaster" and "insurance adviser". As a RFA (& mortgage adviser 13 years) I now incur high compliance costs due to legacy of poor investment advisers historic advice to the public. There is no distinction between quality of the RFA or AFA its purely to regulate what we can advise on.
On 7 December 2011 at 1:15 pm Jeff Royle said:
I agree that the current structure is confusing and meaningless. The fact that there is no requirement for basic qualifications is a crime. The new Disclosure Statement is name rank and serial number, tells the consumer nothing. QFE's are the result of Banks putting pressure on the Government and also misleading. Get rid of AFA and QFE and make sure everyone who is advising on mortgages, insurance and investment is actually capable of doing so. Look at the Pero listings on this site under qualifications....member of NZMBA, what a joke!
On 7 December 2011 at 3:35 pm albert k said:
@jeff r: I agree with you 100%. It was proposed over a year ago to Simon Power including the structure (qualifications, on-going training, practices, etc). His reply was that he's happy with the current regulation, if unclear, contact your solicitor. Hope that helps.
On 7 December 2011 at 4:01 pm John said:
As mentioned above, a majority of clients weren't even aware of a change legislation until receiving a disclosure statement and that document clearly states the type of adviser you are and the products you can give advice on. Hasn't created any confusion to date?
On 7 December 2011 at 4:31 pm Dirty Harry said:
" It was the investment advisers who caused all this crap..."
"the excesses of financial planners who were responsible for destroying the wealth ..."
"high compliance costs due to legacy of poor investment advisers..."

Ahem. When exactly did you guys forget who really caused the majority of the damage? Here I was thinking we all were paying for the incompetence of regulators, the poor management by directors and the sloppy auditing...
On 7 December 2011 at 10:13 pm Philip said:
Good discussion here guys. It's an interesting topic and Nigel is probably right. Guess we could go two ways on it.
Jeff, we have our broker group survey in Mortgage Mag. I think if you read what Mike Pero is doing with its broker/advisers you might take a different view.
On 8 December 2011 at 8:27 am Jeff Royle said:
Hi Philip. Yes it is an interesting topic and one which is easy to get right in my book. My throw at Pero's illustrates whats wrong. If you look at any Pero listing on this site (find a broker) next to qualification is stated member of NZMBA or similar. When I last looked a membership of a professional body is not a qualification. The FMA also missed the boat with it's initial Ad campaign, cowboys is the last thing this industry needs to be associated with! I also see that there is another discussion going on about commissions being abolished. Not sure how that would work in NZ, clients paying for services...I don't think so!
On 8 December 2011 at 9:04 am Jeff Royle said:
I stand corrected, I see that most entries for qualification on the 'find a broker' page have been deleted!
On 8 December 2011 at 5:09 pm Mitsilover said:
I am not surprised by Nigel's comments. The belief that AFA's know it all, and can advise on anything and everything, is dangerous. I do agree that not all cat two products are simple.

I am a 38 year fire & general specialist (not someone who has chosen to be a financial adviser as an alternative career - note how few if any in the life and investment area are career advisers) and have spent weeks organising PI cover for web designers operating in the USA.

The problem is that the rules were written around investment advice. That the two biggest professional associations for insurance professionals and the largest providers of education for insurance professionals, and the qualifications provided by them, are not recognised is a crime.

What we really need is people competent in the field that they give advice in not a bunch of acronyms.
On 9 December 2011 at 12:08 am Giles Thorman said:
I would be very interested to hear whether this is the opinion of Nigel Tate as an individual or whether he somehow did a referendum of all IFA members? Did he at the very least sanction the interview with the IFA Board? I suspect it is a personal opinion and is typical of so many who have served the IFA and its predecessors; their personal opinions are reported as being those held by the whole group. We have had two years of upheaval and all the President of the IFA can come up with is that it is all wrong and lets start again. I do not agree with everything that has occurred in the last two years, but I think slowly we are heading in the right direction. If as an RFA I give bad advice on an Income Protection plan I am liable to the full force of the law the same as an AFA. Stop grandstanding.
On 9 December 2011 at 12:12 am Giles Thorman said:
I would be very interested to hear whether this is the opinion of Nigel Tate as an individual or whether he somehow did a referendum of all IFA members?
Did he at the very least sanction the interview with the IFA Board?
I suspect it is a personal opinion and is typical of so many who have served the IFA and its predecessors; their personal opinions are reported as being those held by the whole group.
We have had two years of upheaval and all the President of the IFA can come up with is that it is all wrong and let's start again.
I do not agree with everything that has occured in the last two years, but I think slowly we are heading in the right direction.
If as an RFA I give bad advice on an Income Protection plan I am liable to the full force of the law the same as an AFA.
Stop grandstanding.
On 9 December 2011 at 10:47 am Garth Clarricoats said:
What Mr Tate has offered is an opinion. It is an ill advised and very likely unsanctioned comment made by a person who we all know has very strong personal opinions and who just happens to be the President of the IFA.
It is unfortunate that Nigel has ventured a persoanl opinion in his capacity as President of the IFA. If his intention was to alienate a couple of hundred IFA members who are RFAs; he has probably succeeded beyond his wildest expectations. I don't believe it was his intention though.
One of the things it takes some time to learn when you are the leader of an organisation is when to venture an opinion and when not to. We have all been guilty of opening our mouths and inserting our feet in the past, so let's give him the benefit of the doubt.
For me AFA, RFA, QFE - it really doesn't matter a hell of a lot when you're out there doing the best you can for your client. And as for any others - let's face it - no matter what the legislaton, regulation or education; none of this stuff is ever gonna get the sharks out of the water. It's just gonna make the shark smarter.
On 9 December 2011 at 10:54 am Garth Clarricoats said:
That being said; it is only logical that the referees of the game; in this case the FMA: will want to make how the game is played as clear as possible to the spectators - our consumers.
If FMA believes consumers are confused by the use of so many acronyms and are potentially being misled we have to prepare for yet more change.
Remember folks - this is CONSUMER FOCUSED regulation.
I suspect that Mr Tate's comments contain a kernel of truth and perhaps a warning that we would be ill advised to ignore.
On 9 December 2011 at 3:46 pm Graeme Leigh said:
Are all IFA members AFAs ? If not, then surely Mr Tate has just alienated all RFA's who are members just like him and the IFA will not be renewing their IFA memberships. Mmmmm...everyone seemed to agree that we needed to legislate out the "cowboys" and now those same people want to legislate out the indians as well. A bit late to have a grizzle don't you think Mr Tate ?
On 9 December 2011 at 7:03 pm Tony Vidler said:
A point of order for the debaters, without wishing to contribute to the acronym war in any way. There is a legal difference in accountability & responsibility for those advisers who are AFA's and those who are not.

An AFA assumes personal liability through statutory obligation that they cannot contract out of under the FAA. Others do not. Both are however subject to the ordinary torts of common law responsibilities though.

There is an accountability difference, amongst other differences.

Please note I am not claiming particular superiority of one over the other, merely identifying what appears to be a lost fact.
On 12 December 2011 at 12:54 pm Giles Thorman said:
I am confused by Tony Vidler's response. He claims that AFAs are personally liable through statutory obligation, this implies that RFAs are not and that we are just subject to common law.
We have ALWAYS all been liable under common law; where however apart from via the FAA (and other legislation) am I as a RFA liable to consider the interests of my clients first and foremost?
How can I be liable for or subject to a visit from the FMA to check my files and my conduct unless I am also subject to the law laid down in the FAA and other legislation?
I do not think there is one bit of difference in accountability.
On 13 December 2011 at 2:23 pm Tony Vidler said:
To simplify the differences regarding advice liability, the AFA is individually authorised and therefore personally liable in full. The RFA does not have to be individually liable as they can provide advice under a limited liability structure. That is the significant liability difference. I hope this helps.
On 15 December 2011 at 12:43 pm Giles Thorman said:
Sorry Tony didn't spot your response. I still disagree, an RFA is also individually liable for the advise he/she gives, providing advise under a limited liability structure does not negate your responsibilities as an adviser to the FAA. An RFA cannot "contract out" as you suggest in your initial response, I am just as liable as an AFA for the advise I have given and continue to give.
On 15 December 2011 at 6:22 pm Tony vidler said:
Thank you Giles.

A fact is a fact, and the only opinions that will actually carry any weight on this type of issue are those of the regulators, disputes schemes, judges & possibly PI insurers at the end of the day.
Commenting is closed

 

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