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FMA asks: What's your plan?

FMA is surveying advisers who are currently authorised to provide DIMS, to determine what action they plan to take after next month.

Thursday, April 23rd 2015, 6:00AM 14 Comments

by Susan Edmunds

As of May 31, all advisers need to have done something to remain on the right side of the new rules.

Those who want to offer class DIMS must have applied for a licence under the Financial Markets Conduct Act. Those offering personalised DIMS need to file an updated ABS, for the FMA to determine whether they are capable of providing personalised DIMS services under the new, more stringent rules.

Despite time running out to take action, very few applications for either class or personalised DIMS have been received.

The FMA said it had approved two class DIMS licences, has another five being processed and is dealing with one application to provide personalised DIMS.

This week it sent a emailed survey to advisers, asking those who are currently authorised to provide DIMS what they intend to do.

The survey is not anonymous.

Advisers are asked to reply by May 1.

FMA spokesman Andrew Park said there were 900 AFAs authorised for DIMS but fewer than 600 had indicated they were providing DIMS in June last year.

Adivser Murray Weatherston said it seemed that no one wanted to be first with their DIMS decision. “They’ll only move when they have to.”

More SiFA members had indicated they were going to apply for a DIMS licence than the handful the FMA had received, he said, so there were likely more applications that were yet to reach the FMA.

He said the process did not seem to be one that could be done quickly. “You wouldn’t want to start on your application process by 3pm if you have to have it filled in by 5pm.”

Park said the FMA would follow up with those who took no action and it was recommending that people who did not intend to offer DIMS after the end of May updated their ABS accordingly.

Tags: financial advisers Financial Advisers Act regulation

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Comments from our readers

On 23 April 2015 at 8:24 am Pragmatic said:
Question for the FMA: What's your plan?
On 23 April 2015 at 10:22 am Charity said:
This survey is the first sign of panic from FMA that they have made a complete disaster of DIMS. They first created a nonsensical distinction between personalised DIMS and Class DIMS. Anything centred around asset allocation was considered class DIMS. Asset allocation determines over 90% of return. If you don't take asset allocation into account in constructing a portfolio then what is it that you're doing? Not one person from FMA could articulate what personalised DIMS looked like. FMA then ramped up hiring to put together teams to review all of the DIMS licences they were going to receive. They received 7 class DIMS licence applications and 1 personalised DIMS licence application. Big surprise! FMA, you are regulating financial advisers out of business. You are making it more expensive for financial advisers to provide advice. You are making it more expensive for clients to get advice. You are making certain that fewer and fewer clients receive advice. You are creating reams and reams of nonsensical guidance that advisers have to wade through rather than spending time providing advice to their clients. And most importantly you are not making it safer, better or more efficient for clients to invest. You are making it a whole lot worse.
On 23 April 2015 at 12:14 pm Brent Sheather said:
Hi Pragmatic

Here is the FMA’s plan: regulate independent financial advisers out of business, work for FMA for two years then join Westpac.

On 23 April 2015 at 3:09 pm AFA Muggins said:
I have no intention of responding to the FMA’s survey – why would I? I’m too busy making sure I maintain my compliance levels and at the same time trying to grow the business, to have time to even entertain such trivial pursuits.
I currently provide DIMS but will be deregistering, and in doing so the FMA will charge me for the pleasure of reducing the service I provide to clients and the administrative efficiency we previously enjoyed. Why not put that bill off till later?
So with more work, more cost, less service to clients, and more administrative overhead, I’m hardly going to waste my time pandering to the FMA’s ‘survey’ to assist them in making my life more difficult than they already have.
On 23 April 2015 at 5:31 pm w k said:
@brent: "work for fma"? adviser with over 30yrs' experience in ins / lending / fp and held prof & tertiary qual applied for job at fma twice. did not even get an interview let alone the job. what do you think?

i am curious to know how many in fma have ever been a self-employed adviser.
On 24 April 2015 at 9:06 am Pragmatic said:
Unfair Brent... you left out ANZ & AMP
On 24 April 2015 at 10:25 am Brent Sheather said:
Good points WK and Pragmatic. I was going to say that the fundamental lack of knowledge of retail advisory exhibited by the FMA is illustrated by the questions they didn’t ask in the annual returns survey of September last year. If I was in the FMA I would have asked questions like:

• How do you get exposure to international stocks – using funds or individual shares? At the FMA we want to understand how advisors recommending individual stocks achieve the degree of diversification needed.
• Do you have an investment banking arm and how do you ensure that investment banking doesn’t dominate retail? Then I would say “we at the FMA want to understand how vertically integrated firms manage the inherent risk that one client will be put further first than the other”.
• What level of total average annual fee is implicit in your financial plan? Then the FMA should say “at the FMA we want to understand that asset allocation and risk profiling is not dominated by the need to achieve a reasonable return after fees at advisory firms which charge relatively high annual fees”.

These are just some random thoughts in no order of importance. The obvious downside of this approach is that the career path of any FMA employee that honestly embraced a “put clients’ interests first” policy would be limited.
On 24 April 2015 at 11:05 am R1 said:
I look forward to an investigation report from the FMA on miss-selling by banks and other conflicted institutions (QFEs) to retail clients as has blown up in Australia; "yeah right". We pretty much have the same environment (including the same corporate 'players'), we have all heard the anecdotal evidence to suggest it is happening in NZ and the FMA's latest report on AFAs supports this too. Will we ever see prosecutions for such behaviour "to promote and facilitate the development of fair, efficient and transparent financial markets"? I will not be holding my breath given the governance of the FMA and its staff clearly favour the QFEs. The importance of DIMs regulation is a red herring in a very large school of barracuda.
On 24 April 2015 at 10:00 pm w k said:
@brent: for that reason, we can safely bet fma will NEVER hire an ex-adviser for fear of exposing their poor understanding of the business.

advisers just have to bear with this indefinite experiential ride or leave the industry. and i want to to leave that's why i'm looking for a job. unfortunately, my qualifications, experience and age don't seems to be of any value to the HR people.
On 26 April 2015 at 2:09 pm Simon Papa said:
Brent, Charity and wk, it’s absolutely right that the actions and approach of the FMA are subject to debate, comment and criticism. But I want to defend the integrity of the people who work there against your insinuations that they lack experience and are biased. I worked for two and a half years as a lawyer in the FMA compliance team up till the end of last year. In my experience the vast majority of FMA staff are smart, experienced and hard working and are focused on trying to get the right outcomes for investors and participants without bias. No doubt the FMA will get things wrong at times but there’s no conspiracy or desire to drive advisers out of business or to favour QFEs. WK, as someone who works in a profession where statistics are important, you’ll appreciate that your failed job application, a sample size of one, in no way proves that FMA personnel lack experience. Charity, the FMA did not “ramp up hiring” to review DIMS licence applications. DIMS is one of 6 new classes of licence so is far from being the sole focus of FMA’s efforts. I don’t think there is anyone who doesn’t think that the FAA needs improvement. There will be multiple opportunities over the next year or so for advisers to have their say as part of MBIE’s FAA review. I think that the mostly likely way you’ll get the results you think are right is to focus on that process, and on playing the ball, supported by robust and reasoned comment and debate on the policy issues. No doubt the industry associations will take a lead but there’s opportunity for everyone to be involved.
On 28 April 2015 at 8:03 am w k said:
@simonpapa: how long more before fma will be able to get things right? it's been several years now mate. i don't think i need to say that in the private sector you don't get the results in 2 or 3 quarters (NOT years), you're out.

i've attended seminars / conferences and and have stop now. because the trouble was virtually speakers were talking about statistics, statistics and more statistics. we all know the problem, but where's the SOLUTION? that's what nobody was talking about. don't you think it requires practical experience just as much as statistics to get the right solution?

i applied for the jobs so that i could contribute back to the industry. but not to worry, i won't ever apply for another job at fma again.
On 28 April 2015 at 10:15 am Brent Sheather said:
Hi Simon

Your comment provides some balance to these discussions. We certainly needed to change this industry as things got very bad with finance company debentures just the latest mis-selling scandal. However as you acknowledge things could have been done better and perhaps one reason things could have been done better is due to the lack of “coal face” experience at the FMA. This is, for example, the reason the restructuring process was totally captured by industry at the start … remember what happened at the Code Committee earlier on. Lack of experience is the reason many of the worst advisers escaped having to do much re-training to become an AFA whilst people like myself who never recommended finance company debentures but unfortunately weren’t in the loop had to waste hundreds of hours on irrelevant non-learning.

I am sure you are right that the FMA staff are hard-working and have the highest levels of integrity but that is no substitute for lack of knowledge. Let’s look at the Board, accountants are represented, economists, professional directors (god help us), lawyers, goodness me we even have a fund manager on the Board. All have great smiles and perfect teeth but their background is institutional banking at best, not retail banking.

Look at the Executive Team, no retail experience, lots of lawyers but from memory they aren’t allowed to give financial advice. I am sure they are all trying hard and have experience in mergers and acquisitions but would I trust any of them to critique a financial plan being sold to my mother? I don’t think so.

In NZ and overseas institutional banking dominates retail and it’s the same at the FMA. In this environment the only people who are able to criticise the system are the independents who don’t work for full service banking institutions.

On 28 April 2015 at 4:36 pm Simon Papa said:
Brent & wk, my comments were about the capability of FMA’s people and their approach, based on my own experience and in response to your comments.

This reflects that I liked and respected my FMA colleagues. I think it’s great that there’s debate and that you care about the profession and are prepared to express your views.

Having said that, I’d prefer not to respond to your other comments in this forum. I’d be happy to have an off-line discussion so feel free to get in touch.
On 29 April 2015 at 10:57 am w k said:
@simonpapa: thanks for your offer, if it is not going to change the outcome, i will have to decline. i don't think any of us are saying that fma is not working hard enough. yes, they are an experience lot but in their own field. put it this way, a very hard working and experienced builder may not be able to fix your car. in short, probably the wrong people / expert on board. i wouldn't call "an expert" an expert if he/she sit on board for 2-3 years and still can't solve the problem.

and for those advisers/HR who says the regulations have made it more difficult to recruit new advisers. you are correct, because my son wanted to go into this business and i strongly discouraged him.

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