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Adviser numbers drop

The number of New Zealanders accessing financial advice is growing, but not fast enough for the Financial Markets Authority's liking.

Thursday, August 4th 2016, 6:00AM 2 Comments

by Susan Edmunds

Liam Mason

The FMA has released data from the most recent authorised financial adviser information returns, which provide a snapshot of the industry in June this year.

There were about 1800 AFAs in New Zealand. Eighty-seven had joined the industry in the past year but 107 left.

FMA director of regulation Liam Mason acknowledged a "slow decline" in adviser numbers and said it was one of the themes that the review of the Financial Advisers Act hoped to address. "We need to think about access to financial advice in New Zealand, both AFAs and more broadly. Declining adviser numbers are not helping that."

KiwiSaver was offered by almost 70% of advisers, followed by insurance, at 41%. Pension transfers and private investment offers were the third- and fourth-most common services offered, at 19% and 14%, respectively.

Most AFAs were aged 46 to 55 and a third had been in the industry more than 20 years.

Just 12% said they were keeping their authorisation active although they were not serving clients. The bulk of AFAs were working for a QFE - only 16% said they were in a sole adviser practice and 9% were sole practitioners.

Mason said the data seemed to indicate that when consumers went to a big firm, whether that was a sharebroker or a QFE, they were getting good access to AFAs.

The number of AFAs working for a sharebroker increased year-on-year.

More AFAs now say they have fewer than 50 clients while the number who say they are serving more than 200 has dropped markedly.

There has been a substantial increase in the number of AFAs with between $21 million and $100 million in client assets.  However, those with more than $100 million in client assets have fallen.

Mason said client bases were growing but not spectacularly, or as much as the FMA would like. “The challenge we’ve got is how people access financial advice. A large group of New Zealanders don’t realistically fit into the AFA customer base, how are they getting access to good advice?"

The drop in the number of advisers with more than 200 clients could indicate the difficulty in servicing such a number, he said.

“Since we introduced the code of professional conduct for advisers and the emphasis on client care, I suspect that firms are finding there is a natural maximum number of clients they can look after.”

He said it was good to see a consistently low level of complaints – more than 90% had received no complaints in the year.

A third said they were paid a fee by clients and 43% said they were paid via commission.

A substantial proportion of AFAs continue to provide financial advice to their clients about acquiring ‘alternative’ products, including below-investment-grade bonds (27%), private equity (14%) and hedge funds (11%).

Mason said the statistics would have to be overhauled once the new version of the Financial Advisers Act came in and it was monitoring advice firms rather than advisers, with more advisers would be in its regulatory net.

“We don’t have a very good picture of the RFA landscape. One of the things we get from the licensing of AFAs is this level of data but we don’t have anything remotely like it on RFAs. One of the things we will get out of the reforms is a much better picture of the financial adviser space.”

Tags: AFA financial advisers FMA

« Financial Advice NZ could play regulatory roleLVR restrictions to be reviewed »

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Comments from our readers

On 4 August 2016 at 7:59 am John Milner said:
As rockstar Bono was rumoured to say at a concert in a similar fashion; "Every time the FMA claps its hands, an AFA leaves the industry".
It's time to tool up and become the professionals we all expect clients to see us as. Rather pointless asking where are the problems the FMA is trying to fix. Speaking to far too many RFA's with their heads still firmly in the sand.
On 4 August 2016 at 8:06 am Murray Weatherston said:
Did anyone else have the terrible thought after reading the last paragraph of the above story (Liam Mason's direct quote) that a big reason for reform of rbnafas is that the regulator wants to get more information about what they actually do.

I think I am slowly being re-programmed to the view that the State doesn't need to have a problem to fix before it regulates.

Yikes! Where next?

Where is ACT's David Seymour in this debate?

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