New Code submitted to FMA
A revised version of the Code of Professional Conduct for Authorised Financial Advisers is out on the same day the FMA releases a report which notes concerns about AFA licensing requirements.
Thursday, December 5th 2013, 6:09PM 
15 Comments
by Susan Edmunds
The main changes from the current code include:
- Clarification that code standard one is paramount. This requires advisers to place the interests of their clients first and act with integrity.
- A provision allowing AFAs to advise on KiwiSaver first-home withdrawals without sitting investment qualifications.
- Increasing the number of structured professional development hours AFAs are required to undertake over two years from 20 to 30 hours, while broadening the definition so there is more flexibility in determining what counts as structured.
- A new code standard for transparently managing conflicts of interest.
- Restructuring the key code standards relating to minimum standards of client care.
Committee chair David Ireland said: “It became clear during the consultation process that the Code’s principles-based approach is supported by the adviser industry. The proposed changes therefore align with this approach but clarify certain principles, particularly where uncertainty as to their application was expressed.”
The final version of the code has to be approved by the FMA before it can be sent to the Commerce Minister for final acceptance.
The Code is expected to come into force mid-2014.
It comes as the FMA released its latest stakeholder feedback report, in which it noted concerns about the requirements for AFAs. It said that there were broad concerns among those it spoke to that the adviser licencing requirements were not strong enough, there was a perception that insufficiently-qualified advisers were operating, that the RFA designation was meaningless and that QFE advisers were under-regulated.
A number of participants said the legislation was resulting in double-standards between AFAs, RFAs and QFEs.
The only stakeholders spoken to who have significant contact with the adviser sector were AMP’s Jack Regan, Sam Stubbs of Tower, Tony Vidler, of Strictly Business, and Stuart Auld, of Morningstar.
The FMA said it had been aware of the concerns for some time but it was the Code Committee’s job to review the standards required of AFAs.
“There is no plan to require RFAs to move to AFA status however the RFA designation is an issue of concern which FMA has already raised with MBIE and the Minister of Commerce.”
Peter Leitch, former president of the PAA, said adviser numbers were going down and it was difficult to understand why AFA credentials would be a major concern.
More important, he said, was the ability of people to access advice. He said it was worth looking at what sort of advice was involved when the main providers encouraged people to switch their KiwiSaver accounts. “It’s more important to look at what advice is given in that context than whether AFAs ought to have level six rather than level five.”
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Comments from our readers
It seems to have taken on a separate life as an urban myth designation. I stand to be corrected but I do not think RFA is mentioned in any of the legislation that regulates us. The term registered (note small r) but not authorised financial adviser is used.
Registered in this context actually means registered under the Financial Services Providers Act, not registered under the Financial Advisers Act.
The allowing of "RFA" to be used is confusing as it suggests it is a designation that is an alternative (which it isn't) to AFA or a competing designation. It's not too far from the truth that you only need to be able to put breath on the mirror and pay a fee to gain registration under the FSPR.
My New Year's resolution might just be to start a campaign to have RFA outlawed.....
I agree with your point that it is not a designation, and have no problem with FMA clearly precluding any use of "RFA" in advertising or other publicity material.
My experience is that life and health insurance advisers prefer to call themselves life insurance broker/ adviser and mortgage brokers use that descriptor. Our subscribers are either AFAs or life insurance advisers - I don't know of any trying to pass off RFA as a designation or qualification.
Cheers
The RFA designation is here to stay sorry whether you like it or not. If compulsory AFA status was forced on all mortgage and insurance advisers the reality is that many would join QFEs and that would inevitably limit clients been able to secure the best possible offer of terms for cover e.g. female recently a new mum, has suffered postnatal depression and she now wants to secure life cover for her family.
If I belonged to a QFE such as AMP she would most likely be forced to pay a loading on her life premiums for depression as that is AMP’s stance for that particular condition. I wouldn’t be able to take her a competitor insurer such as OnePath or Partners Life and secure life cover there at standard rates!
Brent - 100% percent agree with your comment. Does AMP actually have significant contact with the advisor sector nowadays?? When did anyone last see their local AMP sales manager? AMP is the last company I would have thought the code committee should be talking to when discussing advisers and regulation because AMP doesn't even understand advisers businesses.
110% agree with R1 regarding the steak holders ... oops sorry, i mean the stakeholders bit. If these chaps are that good, then why do you think after so many years and millions of dollars, there are still confusion? Then, at whose costs? The longer this drag on, the more some people will benefit. Anyone ever asked FMA to clarify certain part of the Act before? I can tell you the answer now "you are advice to seek legal advise", not sure how they are able to charge an adviser if they can't interpret the Act.
Let's just resign to the fact that we advisers are the suckers taken for a ride. No matter what we great ideas we suggest, it won't happen, period.
Let's just focus on our business and make as much money as possible or start diversifying into another industry to prepare for the day when we've had enough and walk out of the industry. Think about it, who cares about the good honest professional advisers? They're only interested in our fee$$$.
We have ability to deal with a number of product providers without quota rules or penalty which in turn gives us the ability to comply with code standard one. Sure, there are some restrictions on the products we have access to but to be honest there is often good reason for this to be the case.
As AMP advisers we were restricted in the access to finance companies, UDC being acceptable, bridgecorp! Lombard and many others being not acceptable. I for one felt pretty good about that when things turned to custard.
If folks in this forum are going to. Take a swipe at AMP and wish to maintain credibility in their position then at the very least it would assist if they got their facts right,
As a AMP QFE adviser I am critical of some aspects of the AMP offering and model however believe in fair play and honest opinion based on fact rather than legend
For the record, I last saw my AMP sales manager and previously the week before that. We meet regularly and to be clear I am a three hour drive away from Auckland.
Cheers
What I am saying is that no-one should be able to call themselves RFA. Apologies if that has not been clear.
Has anyone else had this experience because if it does happen frequently it is something the FMA should get "feedback" on.
Maybe one of the reasons fees in this industry are so unrealistic is because so many unproductive compliance and CPD consultants are required?
Fortunately, as WK says, we have the luxury of "walking away" if it gets too stupid.
I've said this before "A well written regulation is one which any ordinary person who reads it will understand what it meant, it is immaterial whether you agree or disagree with it. A badly written regulation is one which will be subject to different interpretations".
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