As I alerted in my last blog we've started doing spot checks on advisers to make sure they are now registered.
One simple method has been to check the advertising or website of an adviser and if they are appear to be offering a personalised financial adviser service to the public we check the FSPR register to see if they (or the company they work for in the case of QFE advisers) are on it. Not being registered when you should be is an easy way to end up on the wrong side of a new regulator eager for early results.
During this process we've come across several advisers who have registered but not applied to be authorised. And some of these registered-only advisers are still advertising financial planning, investment advice, KiwiSaver and other services. There’s no information on their website saying they intend to withdraw from those services and nothing to indicate they’re planning to apply for AFA status.
While it’s not illegal yet, with just six weeks to go* we think it’s misleading – your clients need to know the services you offer are about to change.
Come 1 July any adviser advertising or marketing those services when they are not licensed to do so will be breaching the 'holding out' and misleading, deceptive and confusing conduct aspects of the law. We will be actively looking for instances of this and taking action.
If you haven’t already, you should now be reviewing all your marketing materials (website, brochures, business cards, advertising etc). If you’re an RFA check any reference to AFA services is removed. If you’re an AFA make sure you’re describing your services accurately.
For example:
check the scope of the services you describe is aligned with what you are registered or licensed to do. Opt-in AFAs should ensure it’s clear for their clients that they can only advise on category 2 products.
if you have described yourself as a 'sharebroker' in the past, under the new law you can only do that if you or your employer are a member of a registered exchange. And I would caution against substituting 'stockbroker' or other analogous terms which could lead to a holding out or misleading conduct complaint.
if you're using the acronym AFA to mean Associate Financial Adviser, regardless of whether it's a designation granted by a professional body or not, I advise you to choose other language to describe what you do.
AFAs should check you're not implying anywhere that FMA has endorsed or approved your business or advice (see Standard Condition number 7).
These are easy steps to take to protect yourself and your clients.
*Eligible Canterbury advisers do have extended deadlines and have been excluded from our checks.
Mel Hewitson
I am pleased someone has raised the spectre of misleading the investing public and probably the profession as a whole. Some might say the FMA is leading the charge in producing misleading statements. To say on one hand something is entirely within legal bounds then on the other hand to offer the FMA Referees opinion “we think it’s misleading” is getting beyond the legal pale. Stick to what you can legally say and leave the conjecture to the press, they are better at it.
I wonder if you are now seriously advising that a website has to be updated to say “I am registered and have applied for authorisation” or registered and not applying for authorisation”, registered and applying for status within a QFE”, registered eats fish on Friday and steak on Sunday night and sometime between now and the 1st July the FMA may or may not approve my authoristion.
You also go on to purport advisers who are using the IFA acronyms AFP (Associate Financial Planner) or ALU (Associate Life Underwriter) are doing something sinister to undermine the intent of the legislation. I have never come across someone using the AFA acronym to mean Associate Financial Adviser. But you probably thought a bit more sabre rattling was in order to get your point across.
I agree there is still the odd adviser holding themselves out to be “Stock Brokers” but I am sure you will talk to the Kapiti Coast advisers about this soon.
On 17 May 2011 at 2:19 pm btw said:
Mel, that seems a very liberal view on the statutory interpretation of section 77N of the FAA. The section appears to deliberately drafted quite narrowly so as to be restricted to the term "sharebroker" only. Why Parliament did it that way is beyond me, but they did, and I'm not aware of any statutory interpretation rules which would operate to the extent you've suggested. Are you able to make your legal opinion available to the industry generally for clarification, or at least explain the reasoning behind your interpretation? PS. not looking to be difficult - just seeking a better understanding. For example, what about "securities brokers", "equities brokers", "share traders", "share advisors", etc? I note also that sharebrokers are not members of an exchange (and haven't been for many years, I think since the 90's). How does that section apply given that no sharebrokers are capable of being members of an exchange? In other words, what class of NZX participant does the FMA consdier to be a "member" under section 77N, as it not a term used in NZX rules any longer? What about NZX advisors, who are not members per se in any event, but are, in some cases but not others, AFA's.
On 18 May 2011 at 3:28 pm Zodiac said:
Maybe Ms Hewitson could quote the section of the FA Act that forbids the use of thee term Stockbroker
On 19 May 2011 at 1:50 pm Very Concerned said:
Every Blog that Mel seems to leave has some "Sabre Rattling" in it, she advises us against getting on the "wrong side of a new regulator eager for early results".When oh when will she and everyone at the FMA make this about trying to get things right, improving the level of information clients can expect and improve the advise that the general public can access. It seems that Mel and the FMA will not be happy until they have crucified a few people for relatively minor trangressions; these "early results" she is so keen for could well be someones livelyhood. Before some apologist pipes up, I am not advocating no action, I am suggesting educating everyone and making it a journey that we all go on. Anyone going out their way to rip a client off should be dealt with harshly, but over the last 2 years the goal posts have moved so often I don't even know which side of the field to start looking for them.
On 20 May 2011 at 11:26 am Amused said:
I agree with your comments Very Concerned. As long as the FMA and regulation overall keeps its focus squarely on the consumer and “their” interests then I am onboard and behind this process 100% The very worst thing that could happen is that this becomes all about the regulators themselves, keeping bureaucrats employed in jobs that add no value to the public. This would defeat the entire purpose of regulation of the financial services industry in the first place. Given this Government’s aversion to back office bureaucracy it would be wise for the regulators to remember this...
On 20 May 2011 at 6:26 pm old gezzeer said:
Zodiac and others may well do themselves some good by thinking about the whole act vs just a samll section or subsection that may suit there arguement. Sections 34 and 35 apply to all advisers and 77L and 77M applies to Brokers and all these sections relate to conduct or advertisement that is NOT misleading.
On 23 May 2011 at 5:41 pm Alison said:
Talking of "misleading the investing public", what about that clown in the NZ Herald on Saturday telling investors only to to trust AFAs that werte also CFPs and members of the IFA ?
Mel and her team should be on the lookout for people who are intent on undermining the AFA qualificaton before it even gets off the ground.
On 28 May 2011 at 10:21 am Denis said:
I agree with Very Concerned and I am also keen to see the FMA adopt a sensible and balanced approach.
Having said that, advertising yourself as an expert on something - when you're not - has always been unethical and wrong. The FMA didn't make that one up. It's a shame that this kind of behaviour needs legislation to ensure that it doesn't continue. An excellent risk adviser is not an instant expert on KiwiSaver/investments.
Frankly, I am looking forward to this new era as it helps kick into touch the people that shouldn't be anywhere near investment advice.
8 Comments
I wonder if you are now seriously advising that a website has to be updated to say “I am registered and have applied for authorisation” or registered and not applying for authorisation”, registered and applying for status within a QFE”, registered eats fish on Friday and steak on Sunday night and sometime between now and the 1st July the FMA may or may not approve my authoristion.
You also go on to purport advisers who are using the IFA acronyms AFP (Associate Financial Planner) or ALU (Associate Life Underwriter) are doing something sinister to undermine the intent of the legislation. I have never come across someone using the AFA acronym to mean Associate Financial Adviser. But you probably thought a bit more sabre rattling was in order to get your point across.
I agree there is still the odd adviser holding themselves out to be “Stock Brokers” but I am sure you will talk to the Kapiti Coast advisers about this soon.