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Dealer groups should be QFEs

Insurance dealer groups should become QFEs and take total responsibility for their members’ operations, Kepa chief executive Jeff Page says.

Wednesday, July 1st 2015, 5:59AM 16 Comments

He says dealer groups like Kepa should be made to become qualified financial entities (QFEs).

“I’m passionate about it.” I think that the dealer groups should be the responsible entities.”

Page runs Kepa which is the largest dealer group in New Zealand with around 750 members.

“I think the dealer groups need to stand up and say we are responsible for the actions, activities and advice that our members give to the community,” he said.

“I am actively pursuing the FMA to bring it on.”

He says that the FMA doesn’t have the resources to pursue “5000 wayward advisers” and the dealer groups can take on this role.

“Turn us into QFEs. Bring it on,” he says.

“Right now, today, it is all care and no responsibility.”

Page says he has had discussions with the FMA about this idea and it was receptive.

While there is nothing stopping a group being a QFE at the moment, there was little point in going down this track if other groups weren’t QFEs he said.

“There is no advantage for me to go out and be a QFE. None at all. Full stop.”

“Every other dealer group in the market won’t do it, doesn’t have to do it and can’t afford to do it.”

A key advantage of being a dealer group is that Kepa’s members would be giving independent financial advice to customers as opposed to the current crop of QFEs who are essentially just selling their own product to customers.

“We would be totally and utterly responsible for the people we put into our business,” Page said.

Tags: Jeff Page Kepa QFE

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Comments from our readers

On 1 July 2015 at 9:50 am Aurora said:
I am part of a QFE and 2 dealer groups due in part to the current businesses I am part of. Effectively I could be audited by 3 separate entities and be subject to 3 separate compliance frameworks which I can assure you would all be different. Not convinced this would work and pretty sure with current experience one QFE is not going to be happy with another QFE accessing the same data as each other, intellectual property etc.
On 1 July 2015 at 10:41 am Keith Walter said:
Two Points:
1. Jeff talks about “5000 wayward advisers”. I guess he thinks pretty much every adviser is wayward, Kepa's 750 included. A very strange comment from the chief executive of such a group.
2. All very well for a group the size of Kepa but many advisers prefer to be in a smaller group and not be part of McDonald's-type group - which is what would happen with QFEs.

Aside from that, the word I hear on the streets is that QFEs are past their use-by-date like AFA and RFA designation. Perhaps it's time for Kepa to form its own insurance company with a dedicated sales force as has been promulgated in the past. Then, under the changing regime, they would be totally responsible for their sales staff.
On 1 July 2015 at 10:50 am Wise Move said:
Surely you are not serious. It makes no commercial sense. The banks may be QFEs but they control the internal processes of each of their advisors and they have specific systems and staffing in place to monitor every step of those processes.

Dealer Groups don't have that kind of control over individual advisors and you have lost the plot if you think that you can even come close to imposing that sort of control on individual and independent advisers. Especially as currently all us advisors run our own individual systems and processes and work from independent offices and locations.

On the other hand the banks have far better control of their people and their processes as they are in house... and yet the very problem we see occur with advisers under the bank QFE is that they give rubbish advice and they are not held personally accountable for that advice and they slide back under the cover of the corporate umbrella.

QFEs cause the very problem that we independent advisers face on a daily basis when coming up against the banks who try and replace good solid policies with some of the substandard rubbish that the banks provide. And if KEPA thinks they will control us more than the bank controls a paid employee then they are a few sandwiches short of a picnic.

If KEPA wants the liability and the risk associated with being accountable for some of the idiots that are already financial advisors then go for it, you will die by your own sword. It will only take one incompetent advisor to bring the FMA down on KEPA and cause problems (by association) with the rest of the advisers who are associated with KEPA. One mistake by one idiot and you will have all your advisors running to another dealer group.

The main advantage I can see is for KEPA, in that it would give you more control to impose your views on us advisors. From our perspective we could save some money on compliance and registration costs, but in doing so would lose our independence and sole.
On 1 July 2015 at 12:36 pm Backstage said:
Currently any "overseas" potential purchasers of Kepa would be looking and asking, what would we be purchasing. Turning it into a QFE would give it an appearance of structure and control... So to say there is no benefit is rubbish. Already many members question the benefits and are tired of seeing the same old speakers trotted out at their conventions... much needs to be done at Kepa to make it worth some value for a sale (end game i'm guessing.
On 1 July 2015 at 2:22 pm Pragmatic said:
Removing all of the acronyms for a moment: all components of the "value chain" must add value in order to justify a payment. Philosophically the sales culture of a QFE will suit some distributors, whilst the collaborative structure of an AFA Dealer Group will be preferred by others. Personally I'd run a mile from being a Director who is responsible for the actions of a financial sales force...
On 1 July 2015 at 3:34 pm Markyboy said:
Wow, Jeff I take it that your opening title statement sir was not born out of the results from a well researched survey you carried out on your current members on this subject?

Sounds more like a statement made the morning after hitting a few too many bottles of Italian red, as a tester for the week ahead.

Be assured sir I am all for having more control in ensuring that the consumer has correct advice and is protected more, especially now that they have an epidemic of some 5,000 'wayward' advisers on their hands.

Seriously those of us who have made a decision to join a dealer group and there are many, did not due so in order that they could turn up to work and be dictated to by the group as would be the case under a QFE.

They joined, for the support, being part of a team, the sharing of ideas, training and development and probably most importantly being independent in how they operate with high levels of choice and freedom and this will be lost under a QFE arrangement.

The industry needs dealer groups to exist, the consumer needs dealer groups to exist and insurance companies needs dealer groups to exist, whether it be large or small and I am just glad to be part of a dealer group whos senior management believe this to be true as well.

I am amazed that someone in your position would make such an astonishing statement and it will be interesting to read the comments from your existing members who probabaly would have prefered you to survey them on this subject before it went to print. Ciao! Ciao!
On 2 July 2015 at 2:38 pm Cyril said:
Dealer groups play very important role in our wonderful industry, a very important part in my business especially as the insurers and their BDM's have become less and less focused on anything other than product.

There are a couple of exceptions. Dealer groups help the newest adviser through to the most experienced. One of the major strengths of Dealer Groups is/was they let me have a lot of freedom to move/change/ grow my business as I wish so why would the GM and the board of a Dealer Group want to take that away from me.

Jeff has been a long term critic of both QFE and tied agency. I have heard him say this in many forums over recent times. I will not be part of any Dealer Group that entertains moving to a QFE structure.

I am insulted by Jeff's suggestion that their are 5000 "wayward adviser" none who are obviously in his group= yeah right?

How much respect is Jeff paying to the advisers that have been providing him an income? Looking forward to some explanation from Jeff soon. People vote with their feet. we need all Dealer Groups to be strong to help us grow the number and quality of advisers that want and need freedom of choice.
On 2 July 2015 at 3:46 pm RiskAdviser said:
Sorry Jeff, you've missed the mark on this one. Maybe comments out of context and for those advisers who what some independance but don't have the skills to do everything, a QFE model may work, but call it something else.

For the most part advisers who have their own business do so for 1 reason, they want to do it a bit differently to everyone else with some independence from a corporate overlord.

Quite frankly if I just wanted to peddle policies collect a pay cheque and generally not care, then sure QFE, with one of the insurers, AIA, Sovereign, AMP etc or maybe work for a bank with a never ending stream of fresh financially uneducated fodder, it's easier.

Advisers choose to do what they do for many reasons, to suggest that advisers are wayward or vanilla suggests it's time to spend a bit of time in the trenches and reconnect.

Dealer groups have a place, and yes not much responsibility at the moment. Persistency as suggested for the 'churn' exits, is a lever that has some effect and responsibility. If those advisers weren't ejected then the group's remuneration probably would have been impacted, so there are some checks and balances, not strong, but there.

Dealer groups have a role to support, advocate and negotiate on all sides. Contracts distort the market. To contract compliance rather than advise and support compliance, misses the understanding that advisers genuinely want help and assistance and have grown weary of the big stick.
On 2 July 2015 at 4:24 pm Ron Flood said:
Jeff. What on earth were you smoking. Look forward to discussing and will attempt to bring you back from the 'dark side'.
On 2 July 2015 at 7:07 pm Jeff Page said:
I believe the public in NZ needs to be able to get the best advice they can from qualified advisers who can make product recommendations selected from a wide range of suppliers.

I am not for one minute suggesting that Dealer Groups in NZ should be controlling or restricting the choice of companies that advisers deal with, in fact that is completely opposite to what I am proposing. In Australia, (and I do appreciate we are not in the Australian market and that it is different) the DG's hold the license with the regulator and the Advisers are licensed to the DG.

The advantages I see with this model is that the DGs look after their members with Training, education, support and compliance. This enables the advisers to get on and work with their clients knowing that the DG is with them, supporting them, and helping them to be compliant.

The idea of DG becoming a QFE is not about control. It's about providing an environment for advisers to get the best possible support they can.

Another point I would to make, is that it would be foolish to even think about making any changes in Dealer Groups / QFE's or licensing for Dealer Groups whilst the current discussions and possible review is taking place. None of us know which way the regulator in NZ is going to go, but DG's must be ready and able to support their members no matter what happens.

Everything we have done as a DG over the last 8 years has been about supporting our members and this will not change. It's not about control, it's about support.


On 3 July 2015 at 9:12 am Bernal said:
Hi Jeff, which meaning were you trying to describe you adviser force: difficult to control or predict because of wilful or perverse behaviour.

"a wayward adolescent"
synonyms: wilful, self-willed, headstrong, stubborn, obstinate, obdurate, perverse, contrary, rebellious, defiant, uncooperative, refractory, recalcitrant, unruly, wild, ungovernable, unmanageable, unpredictable, capricious, whimsical, fickle, inconstant, changeable, erratic, intractable, difficult, impossible, intolerable, unbearable, fractious, disobedient, insubordinate, undisciplined; archaiccontumacious
"a wayward child"
On 3 July 2015 at 11:11 am Hawaii Five-0 said:
Jeff, et al, what a wonderful conversation. I can't help but think that April 1 was a little while back, and this is indeed some form of elaborate hoax.

Having worked for a QFE, in a previous life, don't underestimate the huge investment in people, processes and systems, but ultimately the resolve to take responsibility for every piece of advice given, regardless of insurer.

It seems rather incongruous that a DG, by its very nature an organisation that is commission driven, now wants to 'regulate'. Poacher turned Game-Kepa??
On 3 July 2015 at 11:44 am Graeme Lindsay said:
Well said Ron!

Jeff - I suggest that you overlook the fact that as a QFE, you would have legal liability for the actions of your advisers, so you would need to have control!

The advantages you list in your response above, i.e. "Training, education, support and compliance" can be provided by the DG in the current model - it doesn't need to be a QFE!

Your comments indicate that you ignore the fundamental that most advisers will not work under a controlling environment. They treasure their independence! They treasure the relationships they build with clients. Most are not going to embrace a QFE structure that, despite your protestations to the contrary, will be a controlling structure!

I suggest that you read the previous posts on this page to gauge the feelings of advisers.

Just because the Australian system licenses the DG, doesn't mean that we should follow like lemmings.

Your "5000 wayward advisers" comment should be withdrawn!
On 3 July 2015 at 12:17 pm Pragmatic said:
The term ‘dealer group’ appears to be loosely used in this discussion. Whilst it’s true that Australian Dealer Groups provide a principal / agency relationship (with Director’s on the hook for the actions of their advisory force), there are few examples of this operating in NZ.

Most kiwi “dealer groups” are either a cooperative of like minds, or an alliance to obtain higher commissions in exchange for Training, education, support and compliance. In both examples, members can are not bound by dealer group rules, and can in fact belong to multiple groups.
On 4 July 2015 at 6:01 pm Jeff Page said:
I am happy to concede that the wider definition of wayward may have offended some readers. I apologies if that is the case.
My definition of wayward is, willful, self-willed, headstrong.
On 6 July 2015 at 1:29 pm Backstage said:
Dealer groups have always struggled to provide value.. Insurers assist (at no cost) with training and advice around the points mentioned.

I wonder about value to seasoned advisers of a Dealer Group and certainly consider they are no value to a potential purchaser. So on 1 hand I get Jeff as Kepa and others struggle to be relevant, this could be their solution. I do see however a flight of members and lower commission clips as a consequence for the Kepa "Management" if they went QFE...

So, given the struggle to remain relevant, the struggle to find speakers who have worked in the industry (ground level)and who are worth paying money to listen to etc... this idea of QFE could be the shot?

I could see most of the Kepa board, shareholders management exit when they come to terms with the potential liability... Can someone ask Darren where he stands on this?

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