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Shorter version of return gets green light

AFAs will have to answer 40 questions about their businesses each year in Information Returns submitted to the Financial Markets Authority.

Tuesday, July 8th 2014, 6:00AM 3 Comments

by Susan Edmunds

The returns are required as part of the new reporting requirements for AFAs.

The first return has to be filed by September 30 this year, covering their business activities up until June 30.

The confirmation of the questions follows two rounds of consultation.

The first draft of the return ran to more than 20 pages and 73 questions. It asked for details of an adviser’s income, which many complained was a breach of privacy.

Associations raised concerns that collecting previously unrequired information would require new CRM systems and add work for advisers.

Questions in the final set include a request for details of any benefits provided from product providers, numbers of clients and transactions, persistency rates, and broking services.

Those that have been dropped include a section on competence, investment returns, income, businesses’ staff structures, advisers’ remuneration structures and the age of their clients.

The FMA says the questions AFAs must answer will depend on their situation, including the types of financial advice services offered.  It says the purpose of the report is to better understand businesses, their compliance approach and approach to CPD.  “It will also help us focus our monitoring and surveillance work and how best to apply our resources.”

It said it would soon provide more information, including confirmation of timeframes and when the return would be available online.

It has also issued a reminder to advisers that compliance with the record-keeping standards of the Code of Professional Conduct for AFAs remained an important focus of ongoing monitoring.

It says the information required to be recorded in relation to each client must be sufficient to demonstrate compliance with the code and include copies of all information and documents provided to or received from the client in writing, in connection with the AFA’s personalised services.

“We expect AFAs to proactively ensure their record keeping meets this standard at to take any steps necessary to improve their processes if they don’t meet this standard. Without proper record-keeping it can be difficult or impossible to demonstrate whether the financial services provided to your clients are suitable.”

It says its response to non-compliance is proportionate to the circumstances. “We are unlikely to take formal action where a breach is a one-off, and includes minor events relating to a technical error or similar issues unless there are other compelling reasons to do so.”

But it says where there is evidence the breaches are intentional or reckless or involve other serious unlawful conduct, the FMA would take action such as a referral to the FADC.

« Return 'may just add work for advisers'The costs of being an AFA »

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Comments from our readers

On 8 July 2014 at 7:34 am brent sheather said:
I would like to test the FADC members competence as financial advisers..my guess is that at least half of them would fail.
On 8 July 2014 at 1:53 pm Amused said:
How many additional requirements will AFAs next have to comply with in 12 months’ time just to keep those employed at the FMA in jobs? Regulation of the financial services industry appears to have benefited the regulators much more than the consumer. And the worst part is the FMA have their sights set on the wrong guys.

Last time I checked there were still unregistered loan sharks and money lenders operating around the country unchecked. Surely the focus should be to have the FMA go after these individuals first and then make sure law abiding advisers are ticking all the boxes?

So, a lot of window dressing for politicians going on at present to try and show that “we at the FMA are actually doing something productive for the consumer (and taxpayer) who ultimately pay our salaries”. The reality is quite different though.
On 10 July 2014 at 9:45 am R1 said:
"the information required to be recorded in relation to each client must be sufficient to demonstrate compliance with the code and include copies of all information and documents provided to or received from the client in writing" - "We expect AFAs to proactively ensure their record keeping meets this standard at to take any steps necessary to improve their processes if they don’t meet this standard". Where I come from "sufficient to demonstrate compliance" is not a standard; it is a motherhood statement that is open to interpretation and allows the regulator huge scope to say after the event that there was insufficient information recorded. This is not acceptable. The FMA needs to take the lead and set a clear standard for record keeping rather than covering its butt with vague statements and putting advisers on the block so the FMA can appear to be doing a good job; when in fact they aren't. What specific information needs to be kept? Do they really have a clue? I suspect AFA's are being held to a higher standard than medical professionals here and will be judged by a group who are removed from day-to-day reality. Again, this is not acceptable and appears to be another example of where a person will need to prove there innocence rather than the enforcer being accountable for setting a clear standard in the first place and having to prove guilt. This is particularly anomalous with the other bigger issues in the industry around IPOs, new disclosure documents for managed funds and other areas where the people working for the regulator are likely to be directly employed in the future.

I guess it is a very good way to justify charging high fees based on the risks we take as AFAs or perhaps more so for the QFEs to continue charging high and hidden fees?

The new guidelines need to be clear, but I suspect they won't be.

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