by Niko Kloeten
The FMA has already produced several guidance notes clarifying its view on topics such as KiwiSaver and product research and how they relate to the Code of Conduct for Authorised Financial Advisers (AFAs) and other adviser obligations.
A recent survey of AFAs revealed concerns that the compliance burden imposed by the Financial Advisers Act had made providing advice to lower value clients uneconomic.
“FMA is considering issuing guidance on some aspects of the Financial Advisers Act and/or the Code of Professional Conduct to assist advisers with compliance for lower value or simpler transactions,” the FMA said in a statement.
“We are, however, at early stages and would need to ensure we strike the right balance between streamlining processes and the consumer protection objectives of the Act. We will keep AFAs informed of our progress.”
The prospect of guidance on the issue has been welcomed by Independent Development Solutions director Barry Read, who said clarity is needed rather than new rules.
“It’s not so much the documentation, it’s the perceived implications of the code and relates to when they have to give personalised financial advice,” he said.
Read said there’s confusion about how much advisers are required to do in certain situations where “limited” advice is asked for by clients, such as when they ask for instructions on investing specific sums of money.
“The issue is: how far does the adviser have to go to understand a client’s current situation?” he said.
“If you need to do a full needs analysis etcetera for a $10,000 lump sum investment it’s a waste of time for the reward. The client doesn’t want to pay $1,200 for a full financial plan.”
Read said the FMA monitoring visits also provided an opportunity for the regulator to clear up any confusion about the subject.
Niko Kloeten can be contacted at niko@goodreturns.co.nz
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