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Higher standards for RFAs a must for financial advice 'profession'

Allowing registered financial advisers to avoid higher levels of regulation would be a step back for the professionalization of the industry, it has been claimed.

Monday, March 21st 2016, 6:00AM 11 Comments

by Susan Edmunds

It seems likely that those who are operating as unauthorised but registered financial advisers will be required to meet new competence, ethical and disclosure standards in a new version of the Financial Advisers Act (FAA).

SiFA submitted on the recent FAA options paper from the Ministry of Business, Innovation and Employment, asking what harm such a move would try to fix.

“The poorest reason for raising the regulatory bar for non-investment financial advisers is because they are now regulated differently from investment advisers. Surely you should be demonstrating problems and harm before even starting to consider regulation."

But Stephen O’Connor, an adviser, member of the Financial Adviser Code Committee and former president of the Institute of Financial Advisers said that seemed to fly in the face of efforts to move towards a profession.

“I’ve been thinking about whether people actually want to see financial advice recognized as a profession. It makes me wonder when some people are arguing for some advisers not to be subject to competency requirements.”
He said financial advisers needed to grow up as an industry and look at a wider picture for the long-term future of the industry. “There’s a bit of disrespect and infighting instead of all getting in the same canoe and rowing in the same direction.”

He said consumers deserved better. “Whether they have the expectation is a different story. I don’t know what they expect but to a degree they deserve better.”

All advisers should have a minimum competency standard, he said. “So there’s no confusion about who is or isn’t a financial adviser.”

Some could then strive to meet higher qualifications too.

But Murray Weatherston, one of the authors of the SiFA submission, rejected the suggestion that RFAs needed higher standards is financial advice was to be a profession.

“Without  deprecating the advisers, I doubt that anywhere around the world that life insurance sales, mortgage broking or fire and general sales  would be considered as a profession."

Tags: Financial Advisers Act registered financial advisers SiFA

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Comments from our readers

On 21 March 2016 at 9:01 am NormanStacey said:
Warren Buffett summed it up. "Never ask a barber if you need a haircut".
Bureaucrats inevitably seek to expand power and influence, but at a cost - sometimes to a prohibitive cost to consumers.
Currently, Registered but not Authorised Financial Advisers do good and valuable work, among often under-insured Kiwis.
'First do no harm'. What is the problem??
On 21 March 2016 at 9:51 am Referee said:
I believe the majority of RFA's realise they will have to attain minimum competency standards in the future and if they aren't thinking this way, they need to change their thinking.

What is a profession? It is "a paid occupation, especially one that involves prolonged training and a formal qualification." As an insurance adviser and holder of the CLU, your comment Mr Weatherston is unprofessional besides deprecating.
On 21 March 2016 at 10:33 am Murray Weatherston said:
When will the message get through that the purpose of Government regulation should be to prevent harm, and not to promote private purposes?

To avoid people misrepresenting my view, I am not against anyone voluntarily seeking to get higher qualifications - that is an admirable purpose for some but not necessarily all RFAs.

But the power of the State should never be used (in the absence of harm) to promote Professional bodies.

I despair that we have not been able to attract advocates of smaller Government to this debate. The anti-regulationists should be all over it!
On 21 March 2016 at 11:05 am Comprehensive Planner said:
Sorry Murray I refer you to the latest report out of the Manukau District Courts with regard to the Mortgage Broker that has just been sentenced to three years jail. Increased minimum standards are required if only to keep these sorts of people out.
On 21 March 2016 at 11:07 am NormanStacey said:
If regulation equated to professionalism, Paremoremo denizens would be the most professional.
Hmmm, maybe they are.
On 22 March 2016 at 11:02 am North Man said:
Agree whole-heartedly with Murray - there isn't a problem to fix.
All this regulation started because of the Finance Companies - it had nothing to do with Insurance Advisers, or Mortgage Brokers.
There are always going to be exceptions - the Mortgage Broker in the Manukau Courts - but don't create obstacles where they are not needed. Most RFAs do a fantastic job; as do most AFAs. There are very few complaints these days; so why create extra layers of complexity & cost.
On 23 March 2016 at 12:44 pm Bruce Cortesi said:
Interesting dialogue here. I would suggest competency is backed up by process followed by knowledge in the particular discipline you practice. Therefore in respect of knowledge relative to your chosen discipline, it will be different within each sector such as Investment, Mortgages and Insurance. The purchase habits for the public in respect of the above is also very different whereas generally people seek advice for home loans or investment but less so for insurance which has traditionally had to be sold. In terms of expectation and competency then a standard code in respect of process is definitely required. Let's face it, it is processes that have caused the claims against advisers - either lack of, or following one that is unethical that has caused the damage. It is not easy to have unethical education or unethical product knowledge - but we all know it is proven that it is easy to have unethical processes.
On 23 March 2016 at 9:05 pm Deranged said:
@ Norman Stacey I love the fact that an insurance 'advisor' has the courage to use the quote "never ask a barber if you need a hair cut" Perhaps change that to "never ask an insurance advisor if you need insurance" the difference being of course the barber gets no commission.
On 24 March 2016 at 7:39 am Murray Weatherston said:
To Deranged
Congratulations on your well-researched and erudite contribution. Not.
Norman Stacey is not an insurance advisor by any stretch of anyone's imagination.
On 26 March 2016 at 7:07 pm Aurora said:
I am a firm believer that there has to be a minimum standard to acheive a designation to operate in whichever area of financial services that one chooses. When I first started work in 2009 I came from teaching English in Korea to suddenly having Financial Adviser written on my business card. What a joke "right"!! Surely that part of the industry has to be fixed. From there I gained level 5, went into a QFE, left and became an AFA CAT 2 only as I only work in the insurance space. Going through the AFA registration at least put me through multiple testimonials, developing an ABS, joining Disputes etc etc. All this talk of RFA's doing no harm or wrong so leave them alone, sure that might be true in most cases but it still means Joe Bloggs can put financial adviser on their business card tomorrow and operate legally in NZ. That is a joke and I was one of those jokes!
On 29 March 2016 at 1:46 pm mitsilad said:
As someone who is a RFA, has a formal qualification and has over 42 years of ongoing professional development I get frustrated at the inference (mainly by AFA's or those wanting to run a course) that RFA's are less qualified or competent. My entire career has been to put the client first. While it was always a requirement of my professional body I have never believed that it needed to codified! It is an absolute moral duty. Qualification and competency should relate to the job you do. Lets face it if you want a plumber you do not expect them to be a qualified electrician even though they are all tradies.

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