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Concerns raised over 'agent' classifcation

The suggestion that "agents" could soon be operating in the financial advice sector has some parts of the profession worried.

Thursday, July 14th 2016, 6:00AM 8 Comments

by Susan Edmunds

Rod Severn

Under the changes proposed by the Ministry of Business, Innovation and Employment, there will no longer be registered financial advisers, authorized financial advisers and QFE advisers.

Instead, there will be three classifications for those offering advice: Financial advisers, financial advice firms and agents.

Advisers would be accountable individually for complying with legislative and their code of conduct obligations. Agents would be the responsibility of the financial advice firms that employ them.

MBIE said: "There would be no legislative difference in the services financial advisers or agents could provide (but in practice, agents would be limited to the types of advice where the financial advice firm could demonstrate it is appropriate for the firm to hold accountability – for example, advice that is subject to clear processes and controls). The advice that could be provided by agents and the controls around this would be made explicit in the firm’s licensing documentation and licensing conditions."

Agents and advisers would both have to take steps to make sure that consumers were aware of the limitations on the advice they received, and firms will have to take steps to ensure that agents are not incentivised in a way that does not put the consumer first. 

Rod Severn, chief executive of the Professional Advisers Association, said the recommendation effectively gave agents of an institution with no personal professional accountability the ability to offer the same advice as a financial adviser.

He said that was a shift away from adviser professionalism, which fundamentally undermined the purpose of the Act.

“We endorse agents providing advice on their employer’s own products. We also subscribe to the concept of financial adviser firms being able to provide a full range of roboadvice. However, individuals who want to give advice more broadly than in respect of their employer’s products, should be fully qualified financial advisers only. Having competent agents is insufficient: Financial advice is a profession, and the law should encourage and motivate individuals accordingly.”

Robert Oddy, of SiFA, said it was disappointing to see that although the QFE name had disappeared, the concept was very similar. 

David Ireland, a financial services law expert from Kensington Swan, said there was scope for confusion in the definition of agents.

“Agent is a defined term and it is well understood what it means in the sector. But the concept of an agent in this context is a different thing. We will have to see how that plays out. Many people who have the title ‘agent’ will not actually be agents.”

Fred Dodds, chief executive of the Institute for Financial Advisers, said some advisers were wondering where they would fit in the new regime. “I’ve had calls saying where does the CFP qualification lie?”

But he said it was positive that all advisers would have to meet the same requirements, and consumers should end up better off.  “A grey area is what do I have to do to play in the game? If I decide I want to be an adviser in February next year and sell life insurance, what is my hurdle to doing that?”

He said more details would become apparent as the consultation process was worked through.

Tags: David Ireland Fred Dodds Rod Severn

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Comments from our readers

On 14 July 2016 at 11:30 am Headmaster said:
Rod Severn is quoted as saying that "Financial advice is a profession, and the law should encourage and motivate individuals accordingly.”

Financial advice is not a profession, and it never will be. Professions, such as those to which doctors, lawyers and accountants belong, enjoy broad levels of trust and respect in the community, and entry to them is only gained through specialised education and training.

Financial advisers cannot lay claim to any of these characteristics. To attempt to turn financial advice into a profession is misguided and futile, and it has been a cause of divisiveness in the industry with many 'them and us' standoffs between AFAs and RFAs.

Perhaps the most convincing argument that financial advice is not a profession is that its proponents feel compelled to repeatedly say that “Financial advice is a profession”. That would be unnecessary if it were true.

The Minister and MBIE have recognised this by stating in the Final Report that "These changes represent a shift away from the current regime which sought to professionalise a subset of advisers (AFAs), towards a regime which seeks to more broadly regulate the conduct of all who are providing advice."

With the Final Report not even a day old, the ‘professionalise’ proponents are complaining about the proposed ‘Agent’ designation as it does not fit in with their failed ideology. And failed it is. Aside from its principal purpose, the Final Report is a comprehensive indictment of the current financial advice regime.

The Minister and MBIE have set a sensible course. May they now stay that course into implementation without being side-tracked by the self-serving aims of a few.
On 14 July 2016 at 1:32 pm smitty said:
@ Headmaster, I read through your comment and to be honest it has irked me.

As a young member of what I believe is a profession, I have sought tertiary qualifications to obtain what I consider necessary to be able to help people with their financial planning needs. I also pursued completion and attainment of CFP in order to demonstrate to clients and peers alike, that I am serious about this profession.

I accept that it has never been treated as a profession in the past, but where do you start?

Your examples of Doctors, Lawyers and Accountants are slightly awry. Each of them has had their fair share of less than ethical behaviour traits.

I did a quick google on the 10 least trustworthy professions, funny result really – The Telegraph – No 10 Teachers (funny that), No 8 Lawyers, and No 7 Accountants.

There was no mention of Financial Advisers, though if you do want to draw a long bow it does rank Bankers as number 3.

So I remain passionate about my profession choice, and hope that people like yourself sit up and take note that there are good advisers in the mix that want it to be a respected career path and not tar everyone with generalist comments that serve nothing more than to raise the ire of a passionate Adviser.
On 15 July 2016 at 9:45 am Jeff Goldsworthy said:
I listened to Chesley Sullenberger (Sully) as a Main Platform Speaker at the MDRT conference in June this year. He was the chap in the Captains seat of US Airways Flight 1549 that crash landed into the Hudson River January 2009 after a bird strike – amongst the MANY poignant points he made, his message was simple “you must keep learning / growing / stretching and innovate before you are forced to by competition or legislation” – I thought those words were very pertinent to our industry today GLOBALLY.
I am aged north of 50 and I am completing my second paper "this year" toward a Grad Dip in Financial Planning – we live in the age of “homework”
@Smitty, I applaud your perspective toward our great profession and damn good on you. I am more than happy to have a coffee with you anytime.
To the naysayers in our profession, this is an evolving game and anyone looking forward (as opposed to a view through the rear view mirror) will know that what was, will not always be in the coming years, other than people will always want great advice from great people who actually care about them. If you cannot see your way forward to evolve, innovate and be ahead of the game, I understand the Banks are employing staff.
To the public who read these articles, not all advisers have the same views but I am sure you, as intelligent people, will be able to determine the difference.
The consumer will always choose who, or which advice model” they” wish to deal with, and it is up to us, the Professional Adviser, to model our offering to meet the wants and needs of those clients we deal with.
As for titles, I think these are irrelevant so long as the client understands what advice they are getting, the qualification of the individual giving it, and the advantages and limitations of that advice given.
On 15 July 2016 at 12:44 pm Tash said:
I think the idea of calling sales staff selling their employer's product an agent is spot on. To offer full advice a person must be able to recommend a range of different provider's products without fear or prejudice. This is particularly true of Life Disability and health insurance where different providers products can differ significantly to the extent the same condition may mean a claim with one provider but not another!
On 15 July 2016 at 2:08 pm NoNoCents said:
@ smitty keep up the good work. With more like you in the Financial Advice "industry" it may one day develop into a "profession". But professional is just a term some believe gives some level of superiority. To me if you need a degree it's a profession but that doesn't mean you are any better or worse than the next person, or that the occupation is any more worthy.

A telling quote selected by Headmaster:

"These changes represent a shift away from the current regime which sought to professionalise a subset of advisers (AFAs), towards a regime which seeks to more broadly regulate the conduct of all who are providing advice."

As long as you can get into an industry by merely "registering" as is currently the case for an RFA it isn't a profession.

I think the proposals are a step in the right direction.
On 15 July 2016 at 2:10 pm Rod Severn said:
BRAVO to both smitty and Jeff for your defence, support and passionate articulation of the profession. Well done!
On 18 July 2016 at 10:25 am Comprehensive Planner said:
There are some varying comments here but to me one thing is clear and that is that it is simply wrong to have "agents" cover by an "advisers" Act, isn't that what should be covered by the FMC Act.
Diluting an existing Act to gain greater coverage is understandable if this was to be marketed, but it is only acceptable to me if it in turn seeks to raise the standard via the supporting Regulations and the extended work of the Code Committee which in turn needs to be extended in its knowledge and financial advice experience base.
The devil as always will be in the detail, so lets see what comes out from under the covers over the next six months or so. We should all take the time to be involved in these discussions as they are the only means we now have to keep this on track and the future profession of financial advice evolving.
On 18 July 2016 at 12:03 pm Ron Flood said:
At first, I too was concerned about Agents but on reading the Broad Legislative Obligations, pages 67 & 68, I no longer have any concerns.

It states that all advisers and agents "would be required to recommend the best product in their suite. If no product that they can recommend is genuinely suitable, they would then be expected to advise the consumer on that basis".

I see this as a wake up call to the Bank's and other ex QFE's when their agents recommend replacement cover. Many sell sub-standard products with restrictive policy wordings.

If they don't introduce a robust written process and peer review ALL replacement business cases initiated by their agents, they may find themselves facing large fines and other puniative measures similar to those seen in Australia.

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