Advisers raise concerns about Code changes

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Advisers in Auckland expressed their concerns about proposed changes to the Code of Professionial Conduct at a meeting in Auckland yesterday.

Tuesday, August 20th 2013, 6:45AM 9 Comments

by Susan Edmunds

Changes proposed to the Code of Professional Conduct for Financial Advisers are small tweaks designed to hone a set of effective guidelines for authorised financial advisers, says Code Committee chairman David Ireland.

A consultation meeting was held on the proposed changes in Auckland yesterday.

Ireland said the committee was open-minded and was open to alternatives.

Some advisers were concerned about how existing AFAs could be affected by the Skills Organisatin’s looming changes to the qualifications framework.

These would replace the current standard sets with a broad financial advice qualification, followed by specialist strands.

The Code Committee is proposing code changes in response to that, which would mean advisers’ CPD plans must take into account increasing minimum qualifications.

Existing advisers will not be retested but advisers must satisfy themselves every time they give advice that they are up to the level required of new AFAs at that time.

Ireland said it would be relatively easy for advisers to sit a particular strand if they felt the need to, as a refresher.

The FMA’s biggest issue of concern was advisers’ ability to show how they determined the advice they gave was suitable for their clients. The committee is adding further detail comment to the code, clarifying what has to be included in the basis of services explanation.

At present, the Code Committee’s proposed changes are contrary to the FMA’s guidance. The committee is suggesting that the explanation need not extend to a suitability analysis every time. This would avoid excessive paperwork, which has been a common adviser complaint.

The committee had thought about including relief for DIMS suitability requirements because it is an ongoing service but had decided against it, Ireland said. “We felt we didn’t need to and it would be the wrong signal to send to the public.”

Barry Read, of IDS, expressed scepticism at the Code Committee’s moves to allow a KiwiSaver-only AFA, saying few would want to take it on when it was not financially rewarding.

Ireland said advisers might not wish to advise on KiwiSaver, but it would be useful to make it available to them.  It would be of particular use to QFEs, who might use the KiwiSaver certificate to evaluate staff.

He said it was a way to remove the hurdles to offering KiwiSaver advice so that advisers could have fewer excuses for not doing so.

The Code Committee wants to replace the requirement for 10 structured and 10 unstructured CPD hours in a CPD period with a requirement for 30 structured hours across two years. Ireland said it was a good compromise.

Structured CPD would not include product training that is designed to help with sales. Some advisers at the meeting said that was unfair because product launches provided useful information.

Committee member Michael Staal said advisers should think of it in the same way as doctors learning about medicines. They might learn about a type of drug and that would be structured CPD, but if they were being sold a particular brand, that would not.

Submissions must be made by September 6.

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