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Code changes impact RFAs

Proposed changes to the Code of Professional Conduct will have more of an impact on registered financial advisers than those who are authorised.

Monday, August 12th 2013, 7:17AM 2 Comments

by Susan Edmunds

The Code Committee for Financial Advisers is asking for feedback on a range of proposed changes, including moves to put more emphasis on the requirement that advisers put clients first, a new qualifications framework that will increase minimum standards for AFAs, more flexibility and clarification in CPD requirements, conflict of interest concerns and moves towards a “KiwiSaver-only” adviser.

Peter Christensen, of Camelot, was part of a teleconference with the committee on Friday. He said the brunt of the changes would be felt by RFAs. 

The committee is proposing that instead of doing all the qualifications for AFA qualification, some RFAs could complete a standard that only covered KiwiSaver. They would then have the same compliance requirements as AFAs but only be able to offer advice on KiwiSaver, not other investments.

Christensen said he understood what the committee wanted to achieve but the compliance that came with being an AFA was exactly what put a lot of RFAs off making the step up.
Instead, he said the committee would be better to remove the RFA designation completely over a period of years, and make KiwiSaver qualifications the first paper registered advisers had to do as part of the step up.

But he said the committee was on the right track with its moves around CPD.

The committee is suggesting that structured hours be able to be carried forward. At present, they can only be taken into the next year as unstructured credits. Christensen said: “In some cases, if an adviser does two code papers, that’s 20 structured credits. But once you get to 15, they don’t recognise the other five.”

That meant that part of a formal qualification was reduced to the same level as something such as reading about an issue relevant to a business.

Christensen said it was also a positive step that the committee was taking product presentations out of CPD consideration. “That helps with credibility.”

But he was concerned that there was no mention of DAOs, organisations such as Camelot that are accredited to offer CPD.

Massey University’s Michael Naylor said the committee had not gone far enough and would be making a submission around some of the issues.

Although the committee is removing a carve-out that enables people who have CFP certification to skip standard set c as part of becoming an AFA, there were no additional qualification requirements for those offering more complex services such as  DIMS. Advisers will only be able to offer personalised DIMS.

Naylor said advisers offering investment services should have to achieve a qualification higher than level five.

Level five was a submission similar to that of a plumber, he said. “I can’t see those people being able to do stock picks. They are not graduates. The course is very, very short. Advising is one thing but making stock picks is a whole different board game.”

Overall, Christensen said there was no real surprise in the consultation papers. “We always expected that the first incarnation would need tightening up down the track. Advisers should be putting clients first.”

« Code changes releasedIFA working on pro-bono offering »

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Comments from our readers

On 12 August 2013 at 8:54 am Barry Read said:
The KiwiSaver only AFA does seem strange as the only level 5 Unit Standards they won't need to do are the investment ones.

That seems counter intuitive to me and I agree with Peter that all the other requirements of AFA just to do KiwiSaver may not be the best business decision due to the time/effort/cost verses the reward.
On 12 August 2013 at 10:21 am Ally said:
Very few "real-life" DIMS providers "pick stocks" and if they do, there is an existing obligation in the Code that they have the research to back up those picks. But in reality. most DIMS providers are simply choosing which managed funds to use. And in that they are very similar to an advisor making a recommendation to a client to use that same fund.

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