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Higher standards imposed on advisers

The impact of Australian providers’ moves to beef up the qualification requirements of financial advisers will be felt on this side of the Tasman too, the chief executive of one professional association says.

Wednesday, August 27th 2014, 6:00AM 5 Comments

by Susan Edmunds

Last week, Australia’s big four banks and AMP announced they were requiring higher standards of the financial advisers.

AMP was first, telling its 3800 advisers that within five years they all must either hold CFP accreditation, Fellow Chartered Financial Practitioner accreditation or a masters in financial planning.

Then ANZ, Westpac and NAB confirmed they were making similar moves – NAB said it would require advisers to hold a relevant degree and an advanced diploma in financial planning, or be working towards one.

Westpac said it had embraced CFP status for its advisers and ANZ said it was moving towards CFP as the standard.

CBA said senior advisers would have to be CFPs by 2017, or working towards it.

The moves are designed to shore up public confidence in the sector, which has taken a hit. A Senate inquiry report in June included allegations of fraud, forgery and a management cover-up within CBA's advice division. Macquarie Group was forced to write to all the customers it had ever had because they might have received sub-standard advice.

IFA chief executive Fred Dodds said he did not expect to see similar changes implemented in New Zealand immediately.  “But as sure as night follows day, in time that will happen.”

He said a lot of advisers had to upskill when the Financial Advisers Act came into force, which was hard for some who had not studied for a long time. Many had not done any further study since.

“They did it but that’s all they did. For investment advisers, where do they go after that? Massey. For lots of guys that’s a step too far… and the 1900s RFAs did not have to do anything at all.”

He said AFA status should be a “ticket to the game”.  “A risk adviser doing a comprehensive risk programme for a client, how much trauma, TPD they need is more complex than which KiwiSaver scheme they should go in. I’d like to think that RFAs would at least go through level five. Why not get them to do CPD as well? I’m not having a crack at risk advisers, but someone who does that should be seen as a professional, they should be able to say to clients that they’ve done study and have to do CPD.”

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Comments from our readers

On 27 August 2014 at 3:46 pm Murray Weatherston said:
Can I make a plea that in future, whenever the word "standards" is used, the sense in which it being applied is spelled out.

In the above article, the word "standards" seems to be related to educational requirements only.

Since it seems the fashion is that higher is always better, can I confidently predict that by the year 2050, the minimum requirement will be a Ph D!
On 28 August 2014 at 9:46 am Tony said:
@Murray - I wholeheartedly agree with your comment. Having seen many of the responses from Advisers in Australia they mirror exactly the same concerns. Education and proof of knowledge are important but the real test of a good adviser is far greater than certification through Uni or elsewhere
On 28 August 2014 at 1:24 pm Ellie Broderick said:
Wayne, absolutely right. David Ross's AFA and chartered accountancy qualification did nothing to stop his criminal activities.

The large Aussie institutions are trying to move the issue away from poor oversight and excessive focus on profits at investors expense ( bad corporate cultural) to an issue of education.

Or maybe the Aussies have realized that the RG146 is about as useful as a professional qualification as my school certificate for sowing. My understanding is like the AFA it's a sop to the regulator.



On 28 August 2014 at 3:16 pm Amused said:
He (Fred Dodds) said AFA status should be a “ticket to the game”. “A risk adviser doing a comprehensive risk programme for a client, how much trauma, TPD they need is more complex than which KiwiSaver scheme they should go in. I’d like to think that RFAs would at least go through level five. Why not get them to do CPD as well? I’m not having a crack at risk advisers, but someone who does that should be seen as a professional, they should be able to say to clients that they’ve done study and have to do CPD.”

Maybe this would be a great development for the IFA and its business but for most of us lowly risk advisers AFA status would actually see us having to jump through God knows how many extra regulatory requirements with no appreciable benefit to ourselves or our clients. In fact the extra compliance requirements associated with been an AFA would undoubtedly mean we couldn't get in front of our clients as often to do the annual reviews so they wouldn't be as well served.

If AFA status was made a compulsory requirement for risk advisers in New Zealand than adviser numbers could decline substantially resulting in clients then been provided with limited options only by risk advisers aligned to a QFE or worse yet the local bank staff member will just flog off his/her bank’s insurance product to the client no matter how inferior the policy wording is.
On 31 August 2014 at 4:55 pm Cyril said:
In my extensive time working with both AFAs and RFAs my experience has been that the quality of risk advise given by RFAs- level 5 qualified or not- is much better advice which offers better claim time outcomes than those supplied by AFAs.

Yes, as a sign of good faith to clients, I believe all risk advisers should be Level 5 qualified. As for the banks.I suspect that most bank staff giving risk advice are at least Level 5 qualified if not AFA qualified selling in most cases the same products as RFA and AFA qualified advisers. The real problem is not bad advice but no advice and no advise. How many advisers can say they spend at least 10% of there time attempting to establish real Centres Of Influence that send them regular quality leads. The banks get the business because advisers do no have referrers and don't ask there clients for referrals.

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