Advisers may be unprepared for new regime: Johnston
Astute Financial Management CEO Sarah Johnston fears many advisers have not had “clear directions from their groups” concerning incoming changes to the Financial Advisers Act.
Monday, May 6th 2019, 6:24AM
Sarah Johnston
Johnston says a lot of advisers could be caught out by the new regime, despite it passing through parliament last month.
She told TMM Online: “I feel there haven’t been clear directions from the groups around helping their people and telling them what they could be doing. The changes [to the Financial Advisers Act] were inevitable.”
Johnston said unprepared advisers could face disruption to their day-to-day business and ability to help customers. “We didn’t want advisers to have to stop trading in order to comply with the new regime. That’s my concern, that some people have left it too late, or not paid attention, and have not been making changes to their business progressively.”
Astute, an established brand in Australia, moved into New Zealand earlier this year through its partnership with Mortgage Express. It has since signed up The Mortgage Supply Company.
Johnston says Astute and Mortgage Express is “fit for the new licensing regime”. "Parts of the new regime have been indicated all along. We have been working on those things and adopting them into our business over the past two years.”
Johnston says regulation “doesn’t have to be scary”, and says Astute is “already ready” for the new regime: “We have systems and processes to review decision making and ensure you put your client first all of the time.”
Under the new Financial Advisers regime, many groups across New Zealand will need to take on an additional regulatory burden on behalf of their members. Many businesses face the difficult decision of whether to become a FAP in their own right or operate under a group's license.
Johnston believes it will be difficult to maintain an FAP license without a sophisticated compliance operation: “While it may be easy to get a FAP, it will not be easy to retain it, from what we have seen in Australia. The cost of licensing will be relatively inexpensive, but people can’t underestimate the cost of compliance and not being able to work in their business. We want people to do what they are good at, looking after clients.”
Johnston says Australia’s Royal Commission will prompt lenders to make greater demands of advisers in the coming years.“Some of the product providers have started going out and doing reviews on the companies they have contracts with. Some have stopped taking on accreditations, as they are reviewing their expectations of advisers. Product providers want to make sure advisers are doing the right thing, and that you are protecting their brand as well as your own.”
Astute wants to expand further in New Zealand and believes its CRM technology and regulatory support will help it win new members. It wants to help mortgage advisers diversify into personal loans, insurance, and equipment finance, and will offer white label products to advisers wishing to go beyond home loans.
She adds: “We’re absolutely committed to helping our members grow businesses with multiple income streams, that aren’t as vulnerable to peaks and troughs [of the property market]. It’s about having the ability to refer within the group to specialists. Especially with the regulatory changes coming in, you’ll need key people who you can talk to, and refer risk and financing on, that will be an extension of your business.”
After striking two big deals so far this year, Johnston would not be drawn on whether the group will add to its growing list of brands. “We’re not looking to be the biggest group, just the best one for our clients. It’s not a numbers game. We’re more than happy to have discussions with more groups, but it is important there is a meeting of minds. We want people who want to change and are willing to adapt to the new way of doing things.”
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