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Action needed on DIMS

Just over two months out from the implementation of phase two of the FMCA, many advisers still have the service included in their scope of authorisation when they do not need to, the FMA says.

Thursday, September 18th 2014, 6:00AM 1 Comment

by Susan Edmunds

It is reminding AFAs to ensure that they update their authorisations to accurately reflect whether they offer DIMS or not before the new rules cracking down on the service kick in.

The FMA says a number of advisers still have DIMS included in their authorisations but do not offer the service.

Under the FMCA, anyone offering class DIMS will need to be licensed and there will be much more stringent requirements of those offering personalised DIMS. It is expected that most DIMS will be class. Licenses need to be applied for by June next year and advisers have until December 1 2015 to update their documentation.

It had originally been proposed that action would be required when the second phase of the FMC was implemented on December 1 but a transition period was granted earlier this year, after many industry participants said the timeframe was unworkable.

In its latest AFA monitoring report, the FMA said because of the looming changes it had visited two AFAs where there were questions about their financial adviser services scope of authorisation.

“In these particular cases, the advisers were required to make changes to their authorisation to more accurately reflect the financial adviser services they were providing.”

FMA spokesman Andrew Park said: “Data from earlier this year suggests that about two-thirds of AFAs have included DIMs in their authorisation. From our contact with the sector there are a reasonable number who confirmed with us they were not providing DIMs in practice.”

He said the FMA recommended that AFAs remove DIMS from their scope of authorisation if they were not intending to offer it after December 1.

“There is no cost to AFAs to do so. They only have to email FMA with that request and FMA will action that request.”

They then need to update their ABS and disclosure statements to make it clear they did not offer DIMS.

The FMA also conducted three desk-based reviews of the ABS documents of advisers providing DIMS. “It is important where DIMS services are provided that the ABS is also clear whether broking services under Part 3A of the FA Act are also provided,” its monitoring report said. “The FMA is likely to ask further questions where this is unclear.”

Park said it was likely some advisers who had not decided yet whether they would go down the contingency DIMS or personalised DIMS or FMCA DIMS route, would be waiting for the final format of the regulations and to find out what exemptions would be granted.

He said the FMA expected to hear about the final aspects of the regulation soon.

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Comments from our readers

On 18 September 2014 at 8:02 am MPT Heretic said:
Perhaps rather than reminding AFAs to get their house in order, the FMA would be better off spending that time finalising what actually constitutes a personalised DIMS and therefore allowing AFA's to make an informed decision. The new DIMS regs are fundamentally changing advice in NZ for both advisers and investors, ,many business models will no longer be valid and it is 'almost' unbelievable that we are 2 months out and still no clarity.

Rather than worrying about word limits on documents perhaps someone at the FMA could clarify just how you can create an investment portfolio under a personalised DIMs regime and not use best practice portfolio management to recommend similar assets for all clients..... anyone?

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