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Best way to solve FAA? Bin it and start afresh

One group representing financial advisers has told the Ministry of Business, Innovation and Employment that the best way to progress the Financial Advisers Act review is to destroy the legislation completely.

Thursday, September 24th 2015, 6:00AM 4 Comments

by Susan Edmunds

SiFA has been having meetings with MBIE as it moves through its process of consultation with financial advice industry stakeholders.

The Ministry has received submissions on the FAA review issues paper and is preparing an options paper for release in November.

SiFA spokesman Robert Oddy said his group was asked what would be useful in terms of the review. “Our suggested was they should destroy the Financial Advisers Act completely and start afresh.”

He said regulation was adding about $100 million in costs for the clients of financial advisers every year, when the cost of running an AFA business, including authorisation and other regulations such as AML, were considered.

“Clients are having to pay that because no one else is going to sit back and pay it.”

He said there was little advantage for consumers when there were such large costs involved.

Oddy suggested that could be part of the reason that many investors decided it was easier to buy property instead. "Notwithstanding that they do not understand the risks."

He said his group had asked MBIE what the reason for regulation was, what problem it was trying to solve, and had not been able to receive a satisfactory answer.

But he said that if the burden of meeting regulatory requirements could not be eased in some way, or if the expectations on advisers increased, a significant number would likely decide to leave the industry. “There’s a certain point you reach where enough is enough,” he said. “If it’s not viable, why should you do it?”

Tags: Financial Advisers Act SiFA

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Comments from our readers

On 24 September 2015 at 10:22 am Mr Slater said:
Whilst I'm not one to argue that the FAA needs improving we need to keep in mind that we need financial regulation to ensure our markets are in line with the rest of the reputable financial world. Before legislation and to some effect still NZ was a haven for dodgy financial transactions.

For example I realise services like transactional service providers (eg FX dealing) may not be done by all advisers but it is by some and as such needs strong regulation.
On 24 September 2015 at 10:32 am Dirty Harry said:
While I agree with the points and the sentiment, I'm pretty sure that threatening to leave the industry is about as effective as smoking out a wasp nest by burning your house.

There has already been plenty of discussion about where the key FMA people come from, and where they end up, so just imagine what they might think about advisers finding the burden of regulation all a bit too much to bear.

The most effective discussion will be one that speaks to the objectives and accountabilities set down in the original discussions that were had prior to the FAA being drawn up. Pretty sure it was about confidence and security in markets and protecting investors. \

And getting rid of the cowboys.

On those measures yes, the whole thing might be said to not be working. In fact, the cowboys seem to have invaded the regulators. Sorry, couldn't help it.
On 25 September 2015 at 9:56 am Charity said:
We need regulation for the financial advisory industry. However, I agree that binning it and starting over would be the best course. It was needlessly complicated and had the smell of lawyers mucking about in something they didn't really understand.

It also felt like it was written as a lawyers' relief act--that is so it would make work for lawyers.

It did a lot to add costs and expense to advisers which did not in the end help clients in the least.
On 25 September 2015 at 12:11 pm w k said:
@charity, i sense exactly the same thing. and is this also known "churning"?

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