by Susan Edmunds
Under the FMCA, only advisers providing completely personalised DIMS can continue to do so without a licence. Everyone else is judged to be providing class DIMS, even those who select options from a model portfolio or make minor changes to a strategy.
But the standards will be high for those offering personalised DIMS. They will have to meet minimum standards of capability, operational infrastructure, financial resources and governance.
Advisers who are already authorised to provide DIMS need to meet the standards when the criteria takes effect next June. Advisers who want to become authorised must meet the criteria from the beginning of next month.
Among the standards advisers will be required to adhere to are that they and their team must have adequate knowledge and have access to any necessary expert professional advice.
New clients must get sufficient information to make informed decisions about the financial services offered. Businesses will have to have effective procedures in place to record client objectives and investment authorities and must ensure that the proposed investment authority is appropriate for the client’s investment objectives.
Advisers must exercise a professional standard of skill and care when selecting investments, including having effective procedures to collect all relevant investment information, having adequate processes to select assets that comply with the authority, stress testing strategies as appropriate and maintain efficient procedures to identify conflicts.
Advisers must require clients to regularly get updated financial advice or reconsider their objectives and must measure and report performance against those objectives. They will also have to have effective processes and procedures to identify and deal with material issues in the business. Client money must be held by an appropriate independent party and outsourced functions must comply with authorisation obligations.
They must also have adequate financial resources to effectively perform the service.
The FMA said it expected advisers’ approach to be appropriate for the size and nature of their businesses. “The systems and controls expected in a single-adviser business will be simpler than those expected in a larger or more complex business. In addition some minimum standards may be met through adherence to the Code of Professional Conduct for Authorised Financial Advisers.”
Additional conditions will be inserted into the existing standard conditions for AFAs, which will only apply to AFAs offering personalised DIMS.
Submissions close December 9.
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