A new era of opportunity for professional bodies

Wednesday, April 20th 2011, 9:11AM 3 Comments

by FMA

The IFA roadshow that recently ended has reinforced to me how valuable professional bodies will continue to be in a regulated world. Let me explain. First, I've talked before about this being a principles-based regulatory regime. The regulator will set expectations and guide where necessary but we won't prescribe advice practices down to the last detail. Professionals will work this out in the interests of their clients, with knowledge of their obligations under the law, including the Code. Secondly, we all know that the Code sets out minimum standards of professionalism but that too, deliberately, doesn't get overly prescriptive with regard to ethical behaviour, client care and Continuing Professional Development (CPD). Thirdly, while the Code was written for AFAs, the Act's 'if not why not' section 66(2) requires Category 1 QFE advisers to provide investor protection equivalent to that provided by advisers who are subject to the Code (ie AFAs). Finally, and I'll borrow an analogy from Ross Butler (Chair of the Code Committee), an AFA licence gets an adviser a ticket to the game but then it's how the game is played that matters - and it matters a lot. The combination of all these factors has created both a need and an opportunity for professional bodies to fulfil their true potential - set, share and uphold standards, provide top drawer CPD opportunities and raise the bar over time - for the benefit of their members and ultimately their members' clients. And by members, I mean all types of advisers, including those within QFEs. There's an opportunity for QFEs to capture the benefits of signing their advisers, not just their AFAs, up to professional body membership. On the subject of CPD, this is an individual responsibility.  AFAs need to make decisions about what sort of training will comprise their CPD for each year and where they're going to get it from.  They need to make sure that any professional development they undertake is suitable and adequate to meet the Code requirements.  Their professional body can help make these decisions and accessibility to training easier. On the question of what counts as structured CPD and what doesn't, I believe true professional bodies have a good handle on this principle and there are examples of it being implemented pretty well.  In fact in response to the submissions of industry and professional bodies, the Code Committee stopped short of a prescriptive approach to CPD in the Code.  Instead it specifies a broad framework within which NZ professional bodies, QFEs and DAOs (Designated Assessment Organisations) can determine what courses will be acceptable for their CPD programmes.  This creates a real opportunity for these organisations to decide what courses will be acceptable, including whether training is structured or unstructured and how many hours of CPD many be attributable. Finally there is a potential regulatory benefit to advisers who are members of a strong professional body. As I've blogged recently, we will take a risk-based approach to setting our monitoring priorities and deciding where to focus our attention.  Professional body membership tends to convey a positive signal about an adviser's attitude towards professionalism. The Commission is keen to continue working with professional bodies - helping them to help their members - not only to influence but also to learn as the regime matures - what's working and what's not?  Professional body membership gives advisers another voice with which to talk to us. Mel
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Comments from our readers

On 21 April 2011 at 1:49 pm James said:
I am not convinced an institution such as the IFA will add value to me as a Financial Planner. It seems their qualification process runs seperate and in parallel to ETITO. Also the brand is damaged by rogue advisers who have not been routed out. My view is that the QFE or Dealer Group ir Institution can take the place of these crumbling bodies. I use Strategi for my training and CPD points are registered online as part of an ongoing develepmental plan. They will not be around in 5 years time
On 22 April 2011 at 10:24 am Forthright said:
I have noted the numbers of AFA’s approved by the SC is creeping along at an average of about 15 a week, according to the front page of the SC website. At this rate it will take the SC another 30 odd months to process the remaining 1858 applications.

I have also found out it is not worth asking the Licensing Assessment division of the SC how one’s application is progressing as a reply of “thank you for your email and we will be in touch in due course” is not very helpful as the due course date is not on any calendars I know of.

I also imagine the AFA applicants mark on the SC Assessors service delivery report card would not be very high based on the SC Assessors progress so far.
On 26 April 2011 at 9:05 am Fred said:
This is nonsense. The writer is deluded. NZ has by design the most prescriptive regulatory regime in the OECD.

The regulatory regime in NZ is entirely prescriptive - down to minutae as to how Advisoer Disclosure Statement and ABS must read. The code is presecriptive; the six step process is prescriptive; the Set Standards are tediously prescriptive; registration is prescriptive, CPD credits are prescriptive - and all are enforced by prescribing bodies or their DAO's.

The regulatory regime considered and dismissed a principals based system for NZ. There is no fiduciary duty or obligation to act as agent for investors.

It is difficult to imagine how the NZ appraoch could be any more vprescriptive.
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