Industry leader calls for one class of adviser

The review of financial adviser regulations has officially started and one industry leader is saying there should not be different classes of advisers.

Thursday, March 5th 2015, 7:04AM 9 Comments

Commerce Minister Paul Goldsmith, this week, released the Terms of Reference for the review of the Financial Advisers Act which signals the start of what will be a long process.

Earlier AMP New Zealand managing director Jack Regan told Good Returns that he doesn’t believe there should be different types of advisers.

The public don’t understand the difference between Authorised Financial Advisers, Registered Financial Advisers and advisers who belong to a Qualifying Financial Entity.

“I don’t think there should be any differential between advisers,” he says.

The key outcome is not what advisers are called, but that their clients get a consistent level of advice which is regulatory compliant.

He said the rules should not be different when the client is putting $1000 into KiwiSaver, buying $1 million of key man insurance or a $2 million investment property.

Regan says one of the unintended consequences of the FAA has been that it has reduced the availability of financial advice to New Zealanders.

This is most evident with AFA where the number of people authorised by the FMA has dwindled and currently sits at 1850.

He says that people and firms have arbitraged the rules and that "has not been good."

He can't understand why the current system was brought in and would like to see it change so there is a common standard for all financial advisers.

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Comments from our readers

On 5 March 2015 at 7:45 am Pragmatic said:
Finally common sense is filtering into the industry. I couldn't agree more on having a single designation for those who dispense financial advice... including those professions who are exempt when providing financial advice in the normal course of their business.

Its refreshing to see commentary that looks at the industry through the lens of the consumer
On 5 March 2015 at 9:05 am Craig Simpson said:
Finally a major institution has seen the light. Well done AMP. Now we just need the banks to get on board.
On 5 March 2015 at 1:01 pm Dirty Harry said:
Here I was thinking that the whole AFA / RFA thing was about keeping advice, especially to 'lower risk' products - in terms of the Govt's objectives - products accessible...

It's the QFE thing that was a concession (or 6) too far, and is the real home of many of the "enforcement issues" the FMA is currently looking at.

AMP spent megabucks putting (dragging some) their guys through to AFA status. So what is Regan saying? He doesn't say in the article where the bar for this One Adviser to rule them all should be set. Is he protecting that investment by wanting everyone else to come up to his "standard"?

If everyone has to spend thousands every year to become, and stay, an AFA the numbers in the industry will plummet, access to advice thing gets worse, underinsurance worsens and several key objectives of the regulations are lost.

What we need is a single standard such as in teaching. A minimum level of competence. A Registered Financial Adviser is not the same as a Registered Teacher. It’s nothing like Registered Medical Practitioner. Perhaps it should be. Teachers come in all shapes and qualifications, but they all have to meet, and retain that minimum standard. Some have masters degrees, doctorates. Some only have BEd. All can only teach the subjects and age levels they are suitably qualified for though.
The public know what a teacher is, and what they do. You don't see a maths teacher taking a PE class do you?

Advisers should be so lucky.

If I was a PE Teacher I wouldn't say “I’m a Registered Teacher”, I would say “I am a PE Teacher”. That's why, despite what my bus. card says, I still say I am an Insurance Adviser.

I disagree completely about "different types of advisers" Jack. But the names suck. Ask, as I have, the public whether they think a REGISTERED adviser is a higher qualification than AUTHRORISED. They actually think registered is higher. They think Authorised sounds provisional, like an L plate. Like the step you take before you are ‘fully registered’. This is ironic, because all AFAs are RFAs as well.

There is Merit to becoming an AFA Insurance, or AFA Investment... but with different names. And maybe the compliance stuff could be lightened up , to somewhere below current AFA level. This would ease the load for current AFAs and bring the RFAs up. The Cat.1 stuff could have its own separate requirements. And so could insurance, mortgage, F&G etc. And there should be no such thing as a “QFE Adviser” – they are QFE staff.
On 5 March 2015 at 3:49 pm Tash said:
I remain amazed at the fervour with which AFA's have pushed for "one class of adviser". AFA's have a legislated competitive advantage, why do they want to level the playing field and remove their business advantage?
On 5 March 2015 at 6:09 pm Commonsense said:
"The public don’t understand the difference between Authorised Financial Advisers, Registered Financial Advisers and advisers who belong to a Qualifying Financial Entity."

And many RFA's and AFA's don't understand the difference between what is financial advice and what is information, or that class advice is not financial advice under the FAA. So no wonder there is industry confusion, increased arbitrage and the dwindling supply of financial advice. It's not surprising that a major institution should start to speak post participation in sweeping up of the financial advice market.
On 6 March 2015 at 8:25 am Referee said:
I agree the 3 categories and names are now proving to be wrong. Your apology Dirty Harry comparing Registered Teachers is an astute example and certainly has merit. And certainly the QFE Adviser had to have been a "concessional" factor and should certainly be abolished.
On 6 March 2015 at 8:59 am macca said:
Yes, one name but designations clearly identifying if the adviser is independent or tied to a product provider such as AMP.
On 6 March 2015 at 3:10 pm Graeme Lindsay said:
Oh, Bloody Brilliant Jack!

You say that "one of the unintended consequences of the FAA has been that it has reduced the availability of financial advice to New Zealanders." and then advocate for a change that will result in a large number of life and health insurance advisers depart. The obvious corollary being a further reduction in the availability of advice!

Registered (but not Authorised) advisors are not the problem - it is the QFEs that don't disclose that are.
On 10 March 2015 at 4:16 pm Comprehensive Planner said:
It's great to see a major player in the product distribution market is promoting greater or more consistent standards for advice but where was AMP during the Select Committee hearings that resulted in the establishment of QFEs (which is a major part of the AMP distribution plans)and the abandonment of the original APB regime. At the end of the day all advisers should meet a minimum standard of education and training and then select their specific area of interest (expertise) if they are not comprehensively covering their clients needs.

Also and using the previous analogy, there is only one teachers registration board that recognises teachers with a varying range of qualifications from a TTC to PhD.

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