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Options emerge for licence-averse advisers

One compliance firm is pondering becoming a financial advice provider to help small businesses in new regime.

Wednesday, January 24th 2018, 6:00AM 4 Comments

by Susan Edmunds

Registered financial advisers with little working knowledge of the code of conduct for professional advisers will need strong systems to navigate the new regulatory system, one compliance expert says.

Gavin Austin, of ABC Compliance, said he was working through the process of determining whether his firm could operate as a financial advice provider under the new rules.

All advisers will be required to work under a licensed financial advice provider, either as financial advisers or nominated representatives.

Austin said small firms would need help, especially if they did not want to join forces with a large dealer group.

Doing it themselves would be onerous, he said, with ongoing compliance requirements.

The Australian experience indicated that such firms could expect to have to set aside as much as a day a week to keep on top of it.

Groups such as Share and Kepa have already indicated that they will offer a provider model to their members who do not want to run their own FAPs.

“We thought we could offer all the compliance behind the requirements of the licence and they could come under our wing but continue to operate mostly in the way they were used to doing.”

When financial advice regulation was first introduced, some advisers tried to join with a QFE to help with compliance but found the restraints on their business too much, and left to return to independence.

“We don’t want to go down that path, we want to provide them with an option where they can still have their independence and retain their own branding, with back-up where needed.”

Austin has a business partner and is looking to contract two other compliance experts, particularly with a focus on risk advice.

There would need to be some controls on how advice was delivered, he said, because of the responsibility the financial advice provider would bear for its financial advisers.

Risk advisers were the most in need of help, he said, because they had not been subject to the code that already binds AFAs and would not have the familiarity with it to start from.

He expected much of the obligations in that code to carry through – those who had been RFAs would need to be able to satisfy the FMA that they were following the rules. 

“Many will need to contract that out.” Austin said he would firm up plans over the coming months.


Tags: compliance Financial Services Legislation Amendment Bill

« Exemption grows under FSLABMann on a mission to diversify financial advice »

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Comments from our readers

On 29 January 2018 at 12:18 pm retired blogger said:
Has anyone thought about the 100 or 200 or even 300 AFA's who are of advanced age and will walk away in 2021, rather than bother with yet more regulations

Perhaps Gavin can help some of them too

Or perhaps the MBIE could think through how more advice will get to ordinary Kiwi mums and dads with such a sudden and inevitable drop in experienced AFA advisers numbers ?

Idea ! the MBIE could design a senior adviser licence to prevent this upheaval
On 31 January 2018 at 10:09 am retired blogger said:
old AFA's

To prevent a sudden drop in adviser numbers in 2021

- allow an extension of an AFA for up to 5 years from 2021

- only available to advisers who over 10 years experience and have been AFA's for 5 years or more

- and they must be age 62 or older

- for a maximum of 5 years

- to end by 2026

- not allow the adviser to manage investment portfolios, no rebalancing

- and no DIMS

- i.e. an advice only licence

On 1 February 2018 at 7:50 am Pragmatic said:
I can’t let this suggestion go by – as it strikes to the heart of the entitlement and culture that the industry needs to be rid of:

“allow an extension of an AFA for up to 5 years from 2021” – why? Surely anyone who is advising on consumer’s financial affairs must demonstrate that they are capable of doing so. Any ‘extensions’ simply provide poor advisers with an opportunity to misguide consumers for longer.

“only available to advisers who over 10 years experience and have been AFA's for 5 years or more” – why? I’ve met plenty of AFAs over the years who are industry veterans, who are complacent (at best) or ignorant (at worst).

“and they must be age 62 or older” – why? I’m unsure why the ‘magic number’ is 62. Many of the new entrants to the industry have taken time to learn and have a robust value proposition to support their services.

“for a maximum of 5 years” – why (refer above comments)?

“to end by 2026” – see above

“not allow the adviser to manage investment portfolios, no rebalancing” – why? So the adviser can dispense financial advice (ie: long term planning, objectives management etc), and yet not assist with the implementation and on-going management… That sounds a bit like clipping the ticket with reduced responsibilities

“and no DIMS” – why? DIMs is merely a mechanism (albeit with enhanced responsibilities) to implement and manage a portfolio. If you’re unable to provide advice, stay out of the industry until such a time that you’re qualified to do so.

“an advice only licence” – as you can sense from the responses, I’m a fan of ‘same rules for all’ (including lawyers & accountants – although that’s another story). The industry needs to start putting the consumer’s interests ahead of self-preservation and egos, otherwise we’ll fail to label ourselves as professionals and will lose consumer confidence.

If industry participants are unable or unwilling to become compliant, then perhaps this is not the industry for them
On 2 February 2018 at 1:58 pm retired blogger said:
praggers you missed the point entirely

there are a lot of grey haired advisers who are slowing down but have a lot of experience and knowledge to offer

come 2021 many will say " why would I bother to jump through a lot of licencing hurdles when I am slowing and going" within the next few years

so they will overnight in 2021 just quit

whereas with a " slowing and going " licence they may well carry on doing some good work

and not all our work is implementing investmets either - far from it

we can help those we advise to find someone or a robot to do that

many older people contribute a lot to NZ e.g. teachers, doctors, ambulance pilots, nurses, university lecturers, and dozens more

why not old AFAs too?

it would be a real shame to let some new (not yet proven to work any better) licencing shut out 200 or more of us

a whole heap of knowledge and experience just cut off when a simpe remedy could be designed

seems to me that NZ needs resources and we old boys are a part of those resources

wasting resources cannot do anyone any good

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