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Financial advisers not up to scratch yet: FMA

FMA head of supervision Kirsty Campbell says that although financial advisers have been regulated for three years there is still work to do to improve their behavior.

Tuesday, August 12th 2014, 7:07AM 10 Comments

Speaking at the Workplace Savings Conference yesterday she said financial advisers are not where they should be when it comes to the core requirements of acting with care, diligence, competency and professionalism.

“I don’t think we are quite there yet,” she said.

She said it was “unfortunate” to be three years into regulation and the FMA was not seeing all those requirements being met.

In the same speech she reiterated the comments FMA director of compliance Elaine Campbell made to the Institute of Financial Advisers conference several weeks ago.

The message is advisers who comply with the FMA and "play it straight", will see the good face of the regulator. Those who don't will see something quite different.

Kirsty Campbell did say that "access to good quality advice is essential" for a properly functioning market and advisers had an important role to play giving advice around KiwiSaver.

"We need trusted financial advisers that put customers first, act with integrity, care, diligence and skill."

She said the the FMA was worried about the number of AFAs in the market and that the average age of advisers was 52.

Currently there are just over 1900 advisers and there are around 2500 people within qualifying financial entities that can give investment advice.

Kirsty Campbell said that while the FMA was focused on policing the AFA population it expected registered financial advisers to act with the same level of care, diligence, competency and professionalism.

She said the FMA was worried about cases when advice is influenced by fees and commissions and the regulator was going to work on the RFA sector "more and more."

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Comments from our readers

On 12 August 2014 at 8:28 am Stan walker said:
Unfortunatley I believe the FMAs definition of diligence competency and professionalism is at odds with their goal of accessibility. Why would you even give Kiwisaver advice for a $20 fee with all the regulatory hurdles.

On 12 August 2014 at 8:53 am Frustrated! said:
Maybe the FMA moves in different circles to me but I regularly attend professional body conferences and other development meetings, I meet lots of different advisers and it seems to me they are all professional, diligent and are putting their clients best interests first ... so just where are all these so called shonky advisers?

I am also frustrated with the FMA continually running down this esteemed profession with broad statements; show us the evidence FMA if you are going to make statements like this! After all you are charged with improving confidence in the financial markets, not damaging it. Also since when has having a law stopped criminal offending, it doesn't. It just provides a solution when the criminal is caught: criminals in the financial service profession are rare.

The FMA should be concerned about the average age of advisers being 52 (there must be a few young ones pulling the average down!); what incentive is there for new people to enter this profession? It would take an investment adviser starting out a long time to reach the break-even point of profitability and during that time they will be belittled by the regulator, be burdened with unnecessary compliance costs and made to fill out endless reports of questionable value to anyone! Give it 10 years and how many non-aligned advisers (I should have been able to say independent) will there be, not many I'm suggesting.
If the FMA really interested in creating an environment where the public of New Zealand can get sound investment (& insurance) advice then they need to create a workable environment that allows advisers the time to do what the do best ... give advice. They also need to create an environment that will attract new graduates to this profession and I am suggesting this is not currently the case.
On 12 August 2014 at 10:25 am traveller said:
Well said Frustrated! If there are faulty practices out there, without naming them, let the FMA tell us what they are doing wrong to get on the wrong side of the regulators.
On 12 August 2014 at 1:53 pm Dirty Harry said:
A cheeky re-write from the other side.

Advisers say that although they have been regulated for three years, there is still work for regulators to do to improve how they are perceived by advisers and the public.

Speaking in forums such as Good Returns recently, advisers have said that the regulators are not where they should be when it comes to their core objective “to promote and facilitate the development of fair, efficient and transparent financial markets”.

“We don’t think they’re there yet” advisers have said.

Advisers say it is “unfortunate” to be three years into regulation and not see the FMA’s core objectives being fully met.

In the same forums many Advisers were strongly critical of comments by FMA director of compliance Elaine Campbell.

The message from advisers is that if the FMA “play it straight” they will see the good face of the advice industry. If they continue to regulate by speeches and guidance notes they will indeed see something quite different.
On 12 August 2014 at 3:58 pm Gavin Austin ABCompliance said:
Love the irony of the re-write Dirty Harry - so apt in many ways. I think that FMA are still struggling to understand the "adviser" side of things after all there possibly isn't anyone there that has actually given advice. Still too many lawyers and accountants and most likely anyone there with the designation AFA has very likely not given any advice under the FAA and others ACTS let alone have to be compliant.

Good to see though that FMA may pay more attention to advisers generally rather that focusing solely on AFA's.
On 12 August 2014 at 4:21 pm Frustrated! said:
Well said Dirty Harry, an amusing anecdote to spell out the truth to the FMA
On 13 August 2014 at 9:44 am Russell Hutchinson said:
Dirty Harry,

You have excelled with that post. Outstanding.

Best wishes,
Russell H
On 13 August 2014 at 10:29 am bill said:
Dirty Harry wins Blog of the year award 2014

Traveller - question of the year award winner - FMA - tell us what advisers are doing wrong - specific facts please as we are not mind readers
On 15 August 2014 at 8:24 pm Andy said:
Well said, Dirty Harry. The FMA hasn't just let us down, it has let down the whole of New Zealand; in both the legal and the moral issues.

Until I explain it to them, none of my new clients can tell the difference between FMA, FAA, RFA, AFA QFE or WTF.

A sad indictment for a body mandated to promote the benefits of reliable advice and instil confidence in the adviser corner.
On 15 August 2014 at 9:34 pm w k said:
@andy: you are not alone. spoke to two clients in two days, not only do they not know the difference, the didn't even know it existed and my disclosure statement could be in their bin. they are only interested in me getting their mortgage approved.

@bill: i'll second dirty harry's award.

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