FMA cracks down on the R word
Advisers should avoid using the term 'RFA' in their advertising because it could mislead consumers, the Financial Markets Authority has warned.
Wednesday, February 8th 2012, 6:30AM 
13 Comments
by Niko Kloeten
FMA head of primary regulatory operations Sue Brown said the issue came up at a recent conference, where she was asked about use of the various designations and terms by advisers in promotional material.
"I cautioned against use of the initials by advisers to indicate they have a professional qualification. You can't say 'Joe Bloggs, RFA' as if it's a professional qualification or means you're a member of a professional body," she said.
"It means you've made what are a fairly low level of requirements to get there, meaning you're not disentitled by a conviction or by any of the restrictions.
"You've simply added yourself to a list - it doesn't mean you've passed any exams or joined an association."
AFAs and other title-holders such as CFAs are free to use these initials in their advertising as they actually signify some sort of qualification.
Brown said the situation in the advice industry was different to other professions such as medicine and law, where qualifications are required before you can practise.
However, she said advisers are allowed to say they are registered, provided they word it in a way that doesn't mislead consumers.
"You can say, 'adviser who has registered' without implying it's a qualification."
Brown said there were a number of purposes to the financial service providers register: "At one level enables the regulator to know how many people are operating in the market."
Niko Kloeten can be contacted at niko@goodreturns.co.nz
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Comments from our readers
On 9 February 2012 at 11:03 am Forthright said:
If you have not bothered to become an AFA don’t bleat about it, be happy you can be merely be registered and have a ticket to play in part of the game. Registered means you can play in the game but can’t go past the half way line or call yourself a half back.
I am pleased the FMA have clarified the situation of advisers using the term Registered Financial Adviser as some sort of qualification. The next step will be the FMA insisting RFAs lift their compliance standard to that which AFAs are held to.
The major point RFAs also need to understand is the FMA is focussed on educating the public that the AFA is the minimum standard. It won’t be long before the public realise RFAs are in fact held to a lesser standard than an adviser who is authorised.
On 9 February 2012 at 2:21 pm Amused said:
Well Forthright that's the difference between advisers like myself and you I guess (if indeed you are an adviser?) I'm not happy to be a "sheep" and blindly pay additional costs to the regulators or training organisations just to keep them employed in jobs! My time and money is actually better spent looking after my clients interests not back office officials who wouldn't have the first clue how to assess a mortgage application or do a needs analysis report for an insurance client.
For the compliance standard of AFA to be made compulsory to every adviser in NZ it would also necessitate 90% of front line bank staff at branches to become AFA also and I can tell you that will never happen. The banks will never go along with it as their retention of staff (who are already burdened with inflated sales targets) will be even more shocking than it is now! If you have an adviser who is made to be AFA and yet a personal banker selling a mortgage or advising on risk insurance at a bank branch being exempt that's not a "level playing field" and no Government (who actually have the final say on all this remember) would be stupid enough to write that in to law.
As for the public's attitude - they will (as always) deal with advisers they trust and respect regardless of the acronym that happens to be present on their business card.
On 10 February 2012 at 9:03 am w k said:
Further to my earlier comment. I am only practicing what I preached. I always tell my clients, spend only what is necessary for you to get the job done, and make sure you know where and who your money is going to. On 10 February 2012 at 12:44 pm Mac said:
"Amused" - I am also a veteran risk writer, but decided to bite the bullet and become an AFA last year. The additional investment knowledge was invaluable and because of my ability not to be restricted to mortage/risk only, I have written additional new business from my client base. On 10 February 2012 at 3:29 pm 6ftndr said:
Forthright, as if the RFAs will ever be forced into AFA "status".
There has and always will be the need to separate those that preach investment ideologies versus those of us that do the real work, what will become more apparent as time goes on is that AFA status will not stop massive errors and fraud occurring, it just means the offending will (hopefully) be pulled up quicker.
Never will I be lumbered with those, I am a true salesman and my only concern is to insure the lives of as many New Zealanders as possible, proudly wearing my RFA badge.
On 13 February 2012 at 9:29 am Dirty Harry said:
"It means you've made what are a fairly low level of requirements to get there, meaning you're not disentitled by a conviction or by any of the restrictions.... "You've simply added yourself to a list..."
1)Well if being an RFA means so little then what was the point of all this then?
2)We all know that convicts have been getting through, either hiding under a QFE or just walking in from Aussie through gaping holes in the rules.
So I guess at least the latter parts of Sue's comment were true. Except we didn't simply "add ourselves" to a list. We 'subscribed' - at great cost!
Oh, BTW what's a CFA? Do you think perchance she meant CFP? OR is CFA the next step in this madness... the new way to describe a Financial Adviser who reaches snapping point and becomes Certifiable!
On 13 February 2012 at 1:45 pm Dave said:
CFA - Chartered Financial Analyst - its the fund industry's equivalent to a chartered accountant. Nothing to do with advisers. CFA's are typically fund managers or sector analysts (the guys who tell the fund managers what to buy/sell/hold). I think Sue was probably using this to illustrate a point about financial qualifications. On 13 February 2012 at 2:01 pm Graeme said:
As a qualified professional in the insurance industry I am tired of the AFA's claiming that RFA's are less qualified. A large number of RFA's have professional industry qualifications but work in the Fire and General Industry. We do not need to be AFA and in fact the system made it virtually impossible to becoame an AFA in our field.
I accept that some RFA's are merely financial advisers (life sales people) who do not want to be qualified and agree that this is wrong.
However, some AFA's are merely Johny-come-lately who have changed from a previous career to become a financial adviser and have passed some very odd exams. I say odd as I am a RFA who has also sat some of those same exams.
chosen
Most in the fire and general insurance industry chose insurance as a career right from the start (ie. from school or university)and have much more experience, qualification and knowledge than some AFA's are likely to gain before they retire.
On 13 February 2012 at 4:28 pm Mac said:
I had two brand new advisers (under training) register as RFAs over their first month in the business. Some RFAs may be very experienced and have industry qualifications Graeme, but it is a joke that some in our industry try to flog the registration as an industry qualification or some form of accreditation. On 14 February 2012 at 9:45 am Mortgage broker since 1999 said:
I say now that The PAA and NZMBA are now merging we make being a member of an approved body compulsory (if they refuse you membership in this, then you simply cant be an adviser)and also make obtaining development points of at least 25 per year compulsory.
Presently these 2 simple things are not compulsory requirements and I personally think this is the 2 most important loopholes missed by the regulators for RFAs
On 14 February 2012 at 10:03 am Lindsay said:
So if all you really did was put your name on a list and paid the dues (which is 100% true) - what was and is the point of it at all - None - On 30 April 2012 at 11:18 am Woods said:
I am an RFA and hold the level 5 NZQA qualification that allows me to be AFA but chooses not to as I dont require that status.I don't need that rope and cost around my neck Commenting is closed
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So… once again the bias from the regulators themselves towards advisers who have chosen to become registered vs. authorised rears its head with comments like this from Sue Brown. There are many experienced mortgage and insurance advisers operating today in the industry that wisely elected not to become authorised and are glad they did not. I for one am thoroughly sick to death of the implication been made by regulators, training associations and professional associations that because an adviser is registered he/she is now somehow less capable than an adviser who is authorised. Do these people think advisers are ignorant to the agenda been pushed here?? All of the above organisations mentioned above have a vested financial interest in seeing as many advisers become authorised as possible…
I like many other mortgage and insurance advisers who are registered (RFA) looked long and hard at the supposed benefits of AFA status to our clients and businesses that were touted by the regulators last year and wisely did not go down the path of becoming authorised. I’d be surprised to hear of any adviser who can honestly say been authorised has since seen them inundated with new clients flocking to the acronym “AFA” on their business card or website. I hope mortgage and insurance advisers that don’t give investment advice but still opted to become authorised enjoy completing paperwork for the FMA because that in all likelihood is all they have accomplished to date.
As for suggesting that my saying to a client I’m an RFA might confuse them a) no client in his/her right mind would not then ask their adviser what RFA stood for and b) no client I have come across since July last year has the foggiest idea regulation of the financial services industry even took place not mention what FMA, AFA, RFA or QFE might happen to stand for!
P.S. Since when did belonging to an association make an adviser any more ethical or knowledgeable than an adviser who doesn’t belong to a professional body? All of the recent mortgage brokers in Wellington who have been in the news for various indiscretions were either past or present members of the NZMBA or PAA at the time of their offending.