3 Comments 3 Commentsby Susan Edmunds
It does not expect that many authorised financial advisers will be capable of providing significant personalised DIM, which AFAs will be able to continue to offer without a licence.
It has released a report outlining how it will approach the regulation of DIMS, from December 1 this year.
There has been some consternation among advisers about what constitutes a DIMS service – and what makes it class or personalised advice.
The FMA said the key to whether a service was DIMS was who was making buy/sell decisions – and who had the power to execute them.
“If the client is making the buy/sell decisions, then it is not a DIMS, even if the client has granted someone else an authority to execute the transactions."
Execution-only services would not count, nor would situations where advisers made decisions but always had them signed off by the client. But it would be DIMS if an adviser could proceed if they did not hear back from a client.
Portfolio rebalancing would count as DIMS if the adviser had the discretion to replace one financial product with a similar one that the client had not expressly chosen, or the ability to vary the original portfolio. If the rebalancing was based on a strategy that took into account an individual’s situation and goals, it would likely be a personalised service – otherwise it would be class DIMS.
Advisers using model portfolios and model asset allocations to make investment decisions under a DIMS arrangement would be offering class advice.
“It is class DIMS because model portfolios and model asset allocations are designed for a class of clients. These models are not originally designed to take account of an individual client’s financial situation and goals, even though an individual client’s financial situation and goals may match a model. A DIMS following a model portfolio will always be a class DIMS even though each client’s individual portfolio may vary.”
The eligibility requirements for AFAs providing personalised DIMS have not yet been finalised.
But the FMA said it would expect AFAs to demonstrate they meet certain minimum standards.
“The bespoke design of investment strategies may need significant time and expertise… we do not expect many AFAs will be capable of providing significant personalised DIMS.”
The document can be found here.
| « Report questions FMA model | IFA working on pro-bono offering » |
Special Offers
Sign In to add your comment
© Copyright 1997-2024 Tarawera Publishing Ltd. All Rights Reserved
The death of the small adviser
“In any bureaucracy, the people devoted to the benefit of the bureaucracy itself always get in control, and those dedicated to the goals the bureaucracy is supposed to accomplish have less and less influence, and sometimes are eliminated entirely.”
― Jerry Pournelle