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Advisers can work with many entities: MBIE

MBIE has confirmed that a financial adviser will be able to work for more than one licensed financial advice provider under the new regime.

Thursday, April 6th 2017, 6:00AM 15 Comments

by Susan Edmunds

Submissions have now closed on the Financial Services Legislation Amendment Bill, which is set to repeal the Financial Advisers Act, and replace it with provisions in the Financial Markets Conduct Act.

In one of the submissions made to MBIE, Graham Duston, of FANZ, said the proposed new framework of financial advisers, financial advice representatives and licensed financial advice providers would create more flexibility.

“The financial adviser-based model will enable any licensed financial advice provider to engage financial advisers on a non-exclusive basis. Those financial advisers would sit under the financial advice provider entity and would not need to obtain their own licenses, thereby generating compliance efficiencies by enabling those financial advisers to simply operate under a licensee’s umbrella, freeing them up to focus on providing the actual financial advice,” he said.

“This would be a great outcome, as an increasing concern of financial advisers is the extent to which the regulatory compliance burden gets in the way of them having capacity to provide the level of service they would like. Being able to align with a number of financial advice licensees would reduce the extent to which financial advisers need their own operations licensed, which is likely to lead to an increase in the availability of financial advice for consumers.”

An MBIE spokesperson said that was a potential outcome of the new law.

“The bill, as it is currently drafted, would not prohibit a financial adviser being engaged by more than one financial advice provider. MBIE is exploring when and why this might happen in practice (it may not be something financial advice providers would permit). We need to make sure that this won’t give rise to any problems or risks that could run counter to the objectives of the new regime.”

Barry Read, of IDS, said how it would work would depend on the details about the new regime that were still to be revealed – such as what the requirements for licensing were, and how advisers would be listed on the FSPR.

But he said it could make sense for some advisers to work with more than one entity – such as those who offer mortgages with one firm but want to be able to do KiwiSaver with another. “If they agreed to abide by the rules and processes of the KiwiSaver license-holder, that could be possible.”

He said when the current regime came in, it had been hoped that some mortgage brokers could offer KiwiSaver advice under the umbrella of a QFE but it did not work because the QFE would have been responsible for all their services.

Tags: financial advisers Financial Advisers Act Financial Markets Conduct Act

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Comments from our readers

On 6 April 2017 at 8:06 am Ron Flood said:
What an utter shambles. So now, MBIE has agreed that a Financial Adviser could in fact work for multiple Financial Service Providers and not be individually licensed or accountable.

I thought April Fools Day was the 1st of the month.
On 6 April 2017 at 8:33 am Barry Read said:
If the are registered as a Financial Adviser under both licencees then the are still individually responsible for their advice services and competency. If they are a Financial Advice Representative under the licencee the entity is responsible, as QFE advisers are now. This makes sense if the process they have to follow as a FAR are totally controlled by the entity and they don't have individual control for the process or advice and are trained to the level of competency the entity has told the FMA that they will be.
On 6 April 2017 at 9:04 am Ron Flood said:
Thanks Barry. Got that now.
On 6 April 2017 at 9:48 am Dusty said:
Thanks for your comments Barry. I think you are "spot on" with your assessment of a number of current independent Adviser business models today. Advisers today may have a number of contractual relationships in place i.e. one or two for KiwiSaver, maybe a couple for life insurance and say another one (or two) for investment offerings. What the new frame work has the potential to do is to allow advisers to build up a sensible, segmented business model for different parts of their client base. If an adviser can build in the ability to leverage off greater operating efficiencies around areas like AML and compliance so much the better.

The key issue for advisers seeking to transition into the new regime will be to develop a "straw person" business model under the new regime and then reflect on how they might implement this for their business. The new legislative frame work could allow some innovative but sensible business models to be developed.
On 6 April 2017 at 9:58 am Dirty Harry said:
How does one seek to become "compliance efficient" and therefore "free to provide financial advice" without first becoming unconcerned about actually being compliant? How does one even entertain this, without first sacrificing what many advisers hold dear - being able to advise independently and in the interests of the client? I am convinced that those attracted to such a scheme find themselves unwilling to BE compliant, unable to change, and too self-interested to care.

We already have ample evidence that those wearing polo shirts have a laughable definition of PTICF to work with, and a lack of proper individual oversight, training, qualifications, disclosure and regulatory monitoring.

Let's just go back to this question: What problem are we trying to solve here? Is it one where QFE's and QFE advisers, and those who want to be, need to have an even more "flexible" regime that allows them to carry on pretending that sales are advice, and endorses the idea that VIOs can/do put client's interests "first"?
Or was it meant to be about enhancing confidence and trust for consumers?

I guess it should at least be acknowledged that “multi-fap” means different things to different people.
On 6 April 2017 at 11:28 am Murray Weatherston said:
So now we know it is theoretically possible, does this notion have any practical legs.

Two challenges

(1) who will be the first FAP candidate who will step up and say "we will think about signing up (as a FAR or a FA) a person who is already
(a) designated as a FAR by another FAP; or
(b) registered as a FA linked to another FAP"

(2)Who will be the first AFA or RFA to stand-up and say "I think I will try and get linked as a FA or a FAR to multiple providers because it will {fill in your own perceived advantages here}."

Because unless both somebody in the Provider camp and someone else in the adviser camp comes forward, there will be no arrangement to consummate.
On 9 April 2017 at 11:03 am Murray Weatherston said:
Current situation with QFEs different

While looking up something else, I discovered this on the FMA website:

"What is a nominated representative?

A QFE can nominate any individual adviser as a nominated representative (see section 74 of the [Financial Advisers]Act). It does not have to nominate all of the agents who sell its products. .....

A person may not be a nominated representative of more than one QFE, except when the two QFEs are related companies, as this would cause confusion about which entity was responsible for the representative's conduct.

A QFE must provide FMA with a list of its nominated representatives, when requested. ...."

I wonder why MBIE/Government has decided the situation should be different with respect to FARs?
On 10 April 2017 at 10:15 am dcwhyte said:
How many more variations and contortions are we going to see before the whole legislative review descends into a total farce?

Sub-heading on p51 of MBIE's Final Report document - "Unnecessary complexity is preventing adequate consumer protection and understanding". There follows citations from various sources on the confusion caused to consumers by the AFA/RFA regime.

I just can't see how on earth is this latest effort is supposed to make things simpler for the consumer to understand the various relationships that the different categories of advisers can have and/or how they operate in different capacities and with different titles.
On 10 April 2017 at 10:51 am w k said:
i know this comment is not going to help, but sadly it's fact - "different bucket, same (....)"
On 10 April 2017 at 10:26 pm Ron Flood said:
David. Surely you can see that the new proposals are very clear and consumers could not possibly be confused.

You will have Financial Advice Providers who don't actually provide advice. Then there are Financial Advisers who will give advice and stand to lose everything if they get it wrong.

And finally unnamed, Financial Advice Representatives, who aren't Financial Advisers, have nothing to lose if they get it wrong, and if they do, no one will be the wiser as they enjoy anonymity and will get a slap over the wrist with a wet bus ticket.

And to add insult to injury, the later can't be called agents or salesman as this would be too close to what they actually are and that would remove confusion.

Still confused? Surely not.
On 11 April 2017 at 8:19 am Brent Sheather said:
Well said Ron. The other important source of confusion and embarrassment and loss of credibility is the fact that, apparently, advisors who are restricted to selling only the high cost products of the institution they work for are also putting their client’s interests first. This is despite the fact that best practice is clearly to minimise fees and diversify by fund manager.

The Government, MBIE and the FMA are all complicit in this “solution”.
On 11 April 2017 at 10:29 pm dcwhyte said:
Ron - absolutely clear as mud, but then I've only been in the industry for 4 decades so I'm barely qualified or experienced enough to cope with complexity. Maybe if you and I spend another 4 decades in the business, we might get a glimmer of understanding as to why those who have little appreciation of what this industry does or how it works, are handed the exclusive responsibility for framing the legislation and regulations.
On 12 April 2017 at 11:47 am Comprehensive Planner said:
David, your comments are spot on as most, if not all of the MBIE policy advisers know little or nothing at all about providing financial advice. We seem to be being dragged around in the ever decreasing circle created by the BEOT in an attempt to worry capable advisers enough that they opt to join the BEOT.

Best advice I feel is to stand alone as a FA, AFA or whatever other TLA that is likely to come out of this debacle. Seek an individual licence and be a professional adviser to your clients providing the ethical advice that suits their needs and meets whatever compliance requirements that need to be met.
On 13 April 2017 at 6:46 am Murray Weatherston said:
@Ron and David
I didn't realise before what great satirists you two are. Or were your pieces above just one-off strokes of genius?
On 13 April 2017 at 10:34 am dcwhyte said:
@Murray - Ron and I have known each other for many years and have developed a healthy cynicism that occasionally borders on exasperated satire. Our accumulated genius knows no boundaries.

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