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RFAs not impressed by push for one standard

PAA may want just one class of financial adviser – but not all of its members agree.

Tuesday, August 25th 2015, 6:00AM 3 Comments

by Susan Edmunds

In its submission to the Financial Advisers Act issues paper, the association said  the distinction between AFAs and RFAs caused consumer confusion and it was in the interests of consumers and advisers to remove it.

The submission said the Code of Professional Conduct should then apply across the industry. The code requires higher compliance standards, particularly around issues such as determining the suitability of advice for clients.

It called for all advisers to meet a minimum level five qualification and maintain an ongoing professional development plan.

The idea is not unique: Many other submissions on the issues paper made the same argument, saying the RFA concept was no longer useful.

But the PAA’s membership is made up largely of RFA advisers who would be most affected by a move to require them to live by the higher AFA standards.

The PAA said its polling suggested two-thirds of PAA's RFA members supported a single competence standard across the industry. More than 70% liked the idea of a single conduct standard.

But PAA members spoken to by Good Returns were not so sure.

Katrina Church, the association’s Insurance Adviser of the Year, said while more education should be encouraged, there would be few benefits to RFAs if they were required to step up to the AFA level of compliance.

There would potentially be many pitfalls, such as having to get into conversations about commissions with clients who would not understand the system but also would not be willing to pay a fee for advice instead.

“It’s safer for me to be an RFA than an AFA… I don’t know if being an AFA brings a lot to the table.”

She said the role of the associations should be to motivate and inspire advisers to higher standards, not dictate.

PAA adviser Dave Windler, of the Mortgage Supply Co, did not support the idea, either. "It would seriously impact high-volume advisers. The best questions to ask is do our clients want us to become AFAs? I reckon they would say 'what's an AFA? I just want my lending done well, under the right terms and quickly'. Every day we work to timelines across multiple clients. All an AFA process would mean is we miss finance dates and settlement dates trying to meet compliance standards."

Another PAA member, Onny Faleafa, said he thought the existing system of RFAs and AFAs was working well.

But he said it would not be difficult to step up to AFA level if required because he had already done the level five certificate.

Another adviser who did not want to be identified said the change would be onerous but many had thought it was likely to happen.

Church said the key was for all advisers to deal with clients in a professional manner. “Then whether someone is an RFA or an AFA should not matter.”

Tags: financial advisers Financial Advisers Act PAA

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Comments from our readers

On 25 August 2015 at 7:29 am Pragmatic said:
Without going through all of the various scenarios, the implications of [bad] financial advice are significant. Therefore I can't see any reason why dispensers of financial advice (irrespective of which element they choose to specialise in) are not treated equally.
On 25 August 2015 at 10:40 am Dirty Harry said:
Reminds me of crime and punishment.
The people want crims locked up - harsher sentences etc.
So we need a new prison.
Then the people don't want the prison in their back yard/town/region.

The wider industry, certainly the submitters, seem to be broadly/majority agreeing that the adviser designation system we have needs changing. Now there is some NIMBYism from “RFA’s”.

RFA AFA QFE is not working. In fact it's a shambles. End of story.

Some of the folks quoted above seem to be underinformed, particularly around the real requirements of the act et al. So I'm not going to respond to each of their individual comments.

Just remember RFA is not a term. AFA’s are registered AND authorised. I'm not so sure the submitters called for Registered-but-not-Authorised-Advisers to "come up" to AFA standards. The IFA called for one new title with advisers obtaining accreditation/qualification for their appropriate specialities/designations/areas of advice. Similar to what you see in education, medicine, law.

There has been a shedload of overreaction in the various interpretations of what is really required in advice processes. Seems a lot of people have forgotten about the "clear and concise" aspect (code standard 6). Yes there are things that need to be included and covered off, but I'm not sure an AFA doing a mortgage would need to have much more in their process than an RFA would.

Perhaps Gavin ABC would like to comment on that?
On 27 August 2015 at 4:01 pm Referee said:
I have to agree with the comments Pragmatic and Dirty Harry have made. Lets get on with it I say.

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