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MBIE missed the mark

Andrew Gunn asks: Why are we okay with the idea of an unqualified workforce?

Friday, March 3rd 2017, 5:59AM 8 Comments

It’s been a week since MBIE released its controversial consultation paper.

Most contributions from both advisers and commentators have focussed on the difference (or lack thereof) between the terms financial advisers (FAs) and financial advice representatives (FARs).

I’m as stumped as anyone as to why MBIE would propose now to insert the word "advice" into the role of "financial representative" when they describe the role as a non-adviser (page 18).

From a competence and qualification standards perspective, the public would assume if they have the word advice in their title that these employees would have to be qualified in financial advice. It seems unlikely this will be the case.

On the matter of standards – you may have missed it – but MBIE seems to have little appetite for supporting a requirement for FARs to be qualified. They point out that “a financial provider may elect to meet the standard through other means – for example , run in-house training courses and provide support/controls that means that their advice meeting minimum standards of competence.” (page 38)

I’m surprised MBIE didn’t mention opening up that solution to other organisations such as educators and professional bodies.

A key plank of the Financial Adviser Act is that all advisers must have the competence, knowledge and skills to complete their job. However, the MBIE focus in this latest draft seems to be on standards of competency. That is, applied demonstration of skills and expertise in the role.

Okay, competency in the job is absolutely vital.

This is demonstrated through CPD and ongoing training. I’ve little issue with MBIE’s solution for demonstrating competence, but where is their solution for the current 6500 RFAs and 26,000 QFE advisers to meet their knowledge standards?

To their credit MBIE describes well the NZQA process of Recognition of Priority Learning (RPL) as an option for demonstrating competence (page 50) – but its seems very unclear from their paper whether they realise a key outcome of a successful RPL process is the achievement of a qualification.

One thing is certain. We are moving further away from the education standards set for the Australian financial advice sector. I think it’s a national scandal that the New Zealand financial services sector still allows for a largely unqualified workforce (AFAs being the shining exception).

Sadly, the biggest losers here, besides the public’s low confidence in an unqualified workforce, are surely the large numbers of financial services employees who will, into the foreseeable future, lack portable qualifications on their CVs.

But in 2017 does this really need to be the case? International standards in financial advice knowledge are described for over 26 jurisdictions worldwide by the Financial Planning Standards Board – standards articulated locally in Massey University and ARA Institute’s qualifications. New Zealand’s current minimum requirement, for the near future, seems to be set at the NZQA level 5 New Zealand Certificate in Financial Services – this also clearly articulates the knowledge standards for NZ financial advice: that is Core Knowledge, Financial Advice and seven specialist knowledge strands. It is fit for purpose.

It will be interesting if MBIE’s idea of "in-house training courses" (page 38) morphs into properly-moderated, resourced, industry-training programme under the guidance of Skills Org, the sector’s industry training organisation. If so, this would lead to large-scale completions of the level 5 minimum qualification. What is vital is that any future provider training needs to be linked to the NZQA standard so their employees have their skills and competence recognised.

If this happens, this would provide significant gains in consumer confidence in the long term and importantly, better outcomes for QFE employees and their career prospects into the future. It’s a watershed moment for MBIE – can its review lead to a "more informed and confident consumer" and also meet the longer-term strategic aims of the NZ Tertiary Education Strategy and the Industry Training Act?

* Andrew Gunn Manager, Member Learning & Development IFA

Disclosure: Gunn is also a director of Skills Active Aotearoa Ltd (ITO for Recreation, Sport & Fitness), and Professional IQ College Auckland

Tags: financial advisers Financial Markets Conduct Act qualifications

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Comments from our readers

On 3 March 2017 at 9:58 am dcwhyte said:
Very good post Andrew. The approach adopted by MBIE reflects the unintended consequences of entity licensing.

Because individual practitioners are excused the personal responsibility of the consequences of their interaction with the client, these convoluted and complex structures have had to be developed.

If, as was originally intended prior to the compromise QFE concept being introduced at the eleventh hour in 2010, everone had to be qualified to AFA standard, we would not be facing this anaemic approach to a properly qualified workforce.

I cannot envisage the public gaining any confidence in the words you cite - all to accommodate those institutions that want to sell their products exclusively and be regarded as providing advice to the consumer - the biggest conflcit of interest ever about to be enshrined in legislation!
On 6 March 2017 at 7:26 am Murray Weatherston said:

I concur, but I think it is more misleading and misrepresentation than conflict of interest.

In my research recently I came across these words by former Australian Chief Justice Sir Anthony Mason speaking to a SPAA Conference in 2009 about the Australian system:

“Our system of regulation proceeds on the footing that the adviser may be a product seller. Indeed, our system enables the product seller to adopt the disguise of a financial adviser and endows that disguise with the aura of legitimacy by calling him a “licensed” financial adviser”.

Substitute "financial advice representative" and that is exactly what you and I and others think is the result of the present FAAReview in NZ.
On 6 March 2017 at 11:21 am dcwhyte said:
Happy to have the issue re-expressed as misleading - as it has proved to be in Australia by many consumers who have been confused by the "aura of legitimacy".
We're heading in the same direction - excellent and highly pertinent quote from Sir Anthony Mason.
On 6 March 2017 at 11:32 am dcwhyte said:
Happy to have the issue re-expressed as misleading - as it has proved to be in Australia by many consumers who have been confused by the "aura of legitimacy".
We're heading in the same direction - excellent and highly pertinent quote from Sir Anthony Mason.
On 6 March 2017 at 12:25 pm Ron Flood said:
I hate to 'flog a dead horse' but a simple change from "Financial Advice Representative" to "Restricted Financial Adviser" is all that is needed.

Any adviser who is part of a Financial Service Provider and wishes to provide advice would then obtain a full license themselves and be personally liable for any advice given.

Once an adviser goes down this path they would need to comply with any education and CPD requiremenst the new Code Committee settles on.
On 6 March 2017 at 4:24 pm w k said:
what has happened to the proposal -either one is qualified to advice or not? get the qualifications and training. i haven't heard of any professionals - doctors, lawyers, accountants, engineers, etc - who are restricted to advice in the field they specialises ...... or someone who is "partially pregnant"?
On 7 March 2017 at 10:52 am Ron Flood said:
w.k. Unfortunately that boat has sailed and MBIE/FMA have no intention of requiring all advisers to be qualified.

Therefore, there should be some way for the unsuspecting public to know that the person in front of them has had some restrictions placed upon them as to the "advice" they are providing.

Any adviser who doesn't want to be restricted would apply for an individual license as mentioned in my previous post.
On 7 March 2017 at 4:28 pm w k said:
ron: the boat has never been there in the first place. advisers had been mucked around all these while, period.

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