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Last Article Uploaded: Monday, February 26th, 6:34PM



[GRTV] No back-down from Level Five, Dale-Jones says

A suggestion that the new Code of Conduct for financial advisers is a back down on the requirement for Level Five qualifications is incorrect, Code Working Group chairman Angus Dale-Jones says.

Thursday, May 16th 2019, 9:38AM 3 Comments

Advisors are happy now that the code of conduct has finally been approved, and we have with us, Chairman of the code committee, who's been the key author, I guess, of putting the code together.

Well, it's actually very much a collective product, and not just of the nine of us.

But you were the face of it.

I have presented on it a lot, but the authorship goes to the nine members, but also all the consultation feedback we got, so thanks to everybody there.

Thank you for that. It's really interesting the code, because we had two drafts, and the final one, which was approved by the minister was quite different to where we started. The question, which I'm really interested in and asking you to start with is, what you set out to do at the very start and what you finish with at the end seem like two quite different things. How did that happen?

We were on a deliberate trajectory. A year ago, in our first big consultation round, we had actually done some of informal stuff before then, we wanted to canvas as many ideas as possible, so that was a 50 page consultation, and we threw a lot in the air, and we got some quite strong feedback.
I think in a thematic sense, the most useful feedback we got was, work out what the code is doing in the overall regime. For example, we'd had a lot of process stuff in there, and you can see now that we've pulled right back from process. That trajectory of simplification and clarifying the purpose of the code has been important to us.

Is it saying to us that what you were trying to do, and by taking out all the process stuff it was actually just too hard to do a code like that, and you had to come up with something more simple?

No, it was actually understanding the regime. More so than the financial advisors act regime, and in fact, probably more so than some comparable environments. You need to look at this environment as how the composite parts of FMA licensing, the legislation itself, and that breaks into various components, their duties there, their liabilities there, and some other things. the disclosure regulations, some other regulations, and the code all dovetail together. Once you start to work out the different roles of those different part of the regime and how they can compliment each other, that you get a true sense of what the code needs to look like.

Are you saying that the pieces you put into your earlier drafts of the code are now really being looked after by different things like disclosure regulations?

Just like you, we don't know precisely what the final form of the disclosure regulations look like, so we don't have any inner access there, nor do we know precisely what FMA's licensing setup is going to be, but we've got a fairly good idea of what's likely to be covered in those parts of the regime, and it became clear to us the things we needed to leave alone, and also the things that we could usefully focus on.

So that's why it's become a much more simple document, as things are done in other parts of the legislation. It must be difficult then, if you don't actually know, and we don't know what the disclosure regime's going to look like to actually put it into how the code's going to work.

Well, there were two other things at play. The first was that we thought about audiences, and our audience is not just advisor, advisor businesses, and regulators, it is the consumer as well. We wanted quite complex concepts that could be communicated easily. I think we're part of the way there. I don't proport that this is a perfect or final or best way of doing something, but that's what we've been trying to do.

Also, a lot of what the code is doing is actually the front end of the whole conduct piece that is so topical at the moment, and that works to attitude, so it was trying to find a way of tapping into things that will be useful for all different business models to help in shaping that attitude conversation. How do we place accountability for customer outcomes at the forefront?

I'm glad you touched on conduct, because one of those things which a number of people have brought up with me is that in a replacement business, should it be included in the code? Why wasn't it?

Actually, we determined before that first major round of consultation, in the mini-consultation we had back in October, November 2017, that we wanted to focus on principles. In fact, that has become more and more important as we realized the code needed to apply to so many different business models. If we hadn't focused on principles, we would have got lost. When it comes to replacement business... actually replacement business is a very specific concept, so we-

It's not a principle thing, it's a-

So we've tried to see principles that work together with the rest of the regime to deal with replacement business.

What principles in the code, which is being accepted, cover off the replacement business?

That's a combination. There's a duty in the legislation, being the nature and scope, then there are three different duties that operate on the code that all play to replacement business. First of all, there's the suitability piece ... And I suppose to a certain extent the customer needs to understand as well, but then there's also those overarching concepts of treating your client fairly and acting with integrity. All of those pieces at as a whole to provide a web around replacement business.

So, you ended up with a principle's based code, or we've ended up with a principle's based code, which was different from where you started, which was more descriptive. Was there a light bulb moment that changed that?

Yes. Getting 1600 pages of feedback saying, "Don't do this. Don't do this. Don't do this." That was very intuitive. When you get strong, consistent feedback, "We don't think you should be in this area." That's a trigger for reflective conversations about, "Okay, well we want to get that balance right between good quality advice, and advice that's available to people. How do we effectively deal with that balance, if we're not going to touch this area?"

The submissions you got were really important, in terms of shaping?

If you ask me to prioritize what was the most important thing out of all of this, it's not the document. It's the engagement.

And there's been plenty of engagement, and you will have seen it through Good Returns.

You guys have played a big part in it, and thank you very much.

Thank you. No, no, it's been an interesting journey.
Another is CPD. People were expecting a reasonably prescriptive, this is how many hours you have to do, and things like that. Why didn't you go down that track?

I'll give you a headline here that I hope you don't use. That is, I don't know whether we've got CPD right yet. We're still evolving that. What we've done in moving away from an hour's basis to CPD is firstly, everybody's different. All sorts of advice business models just saying 'x' number of hours for CPD wasn't going to be the solution.

It's too generalistic?

Yeah, it's too general. The other problem is, we all know that CPS hours are used in all sorts of different professions, and they get abused. It's an easy way of ticking a box, saying, "I've done this this year," but people have the webinar going on their desktop while they're doing other work. It's not proper engagement with keeping their skills up to date.
When I say I think we're on an evolutionary path with CPD, is we've set a principle-based approach to CPD, which we think is the toughest competent standard of all. We think that the CPD standard is tougher than the actual entry standards, because it's all about making sure you keep up-to-date with things, so you can do your job properly, and that's a tough ask. To document how each year you're thinking about what you need to know to do your job properly, and then tick off against your own assessment. How are you keeping up with that? That's difficult, but we acknowledge that people might read that down or up. We're hoping they read it up. If they read it down, we will look at it again in a future revision.

So CPD's an evolving subject, is what you say?


Because the other one is recognized prior learning, people will thinking, "Oh, that's just going to be a minefield." I guess time will tell.
A comment Marie Weatherson made is that the code seems much more generalistic and so the FMA's going to end up writing lots of guidelines and stuff like that. Do you think that's going to happen?

It's always open to the regulator to put out guidance, so that's fine. Part of us focusing on principle is because the zone we want to be in is those big ticket directions on what people need to think about attitudinally. Inevitably, there will be some areas there that the regulator feels needs some more thinking about, and I've essentially got three mechanisms that could take action against a person. They could come to us with a suggestion that the code, working group now, code committee to be, looks at things in more detail for later revision, or they can put out some guidance themselves. We'll navigate that as it happens, but I think that's just the nature of the environment we're in.

Conflicts of interest weren't really covered off from that, but I think you've probably answered that by how the whole code has been put together?

What we've done there is, on the one hand, being careful not to interfere with the complex duty and the legislation, but at the same time, prioritize the fact that in a situation where you're looking at conflicts, it has to start from thinking about dealing with integrity, operating with integrity. We've tried to highlight that.

Going forward from here, what's your role with the code? You haven't escaped it totally?

We're all on three year terms, so that's got another year and a bit to run. The idea is, just like the existing code committee, the new code committee would have an ongoing life, so a martyring role. To hear what people are saying about how the code is operating, and that goes to your point about the FMA issuing guidance. If the regulator says something's not working or we can't enforce certain things, we need to look at that and consider that.
We've already flagged, on one particular standard, the investment planning competence standard, that it's an interim standard, not a final standard, so that's a piece of work that we will come to in due course.

So there's still plenty more work to be done?

You look at other regimes, advice and conduct is a complex space, there is no perfect answer. A FOFA in Australia, the future of financial advice has been going for what, 10 years [inaudible 00:11:08], which is equivalent to the code working group has been going to double the length of time we have. These things can't just be solved, and things evolve over time.

If you had to score the code out of 10, would you do it?

I wouldn't be that bold.

I'm sure others will be.

I'm sure they will.

Anyway, thank you very much for coming and explaining more about the code. I know everyone thinks you're very happy that it's actually been concluded, and they've got a bit of certainty going forward, so thank you, Angus.

If I can just reiterate, thanks to you and to everybody who's participate in the process. Much appreciated.

Thank you, Angus. Awesome.


Watch the interview here!

Also available on SoundCloud.

Tags: Angus Dale-Jones Code Working Group GRTV

« [GRTV] Pie Fund Management CEO, Mike Taylor is in studio[GRTV] Code gets eight out of 10 from long-time critic »

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Comments from our readers

On 17 May 2019 at 2:35 pm reportthetruth said:
Your article quotes Angus as saying; 'the competence standard was clearly Level Five' and that 'the easiest way to do so would be to attain the qualification.' I actually didn't hear him say that in this interview??
My understanding is that if an alternative can demonstrate capabilities equivalent to the outcomes of L5, the individual doesn't need to have L5. Is that incorrect?
The standard of GENERAL CK&S is; ‘that the person has capabilities equivalent to the general qualification OUTCOMES’ within the L5 qual (specifically 1-4 of V2 of the qual - look it up). Not that they actually HAVE the Level 5 qual.
The standard of PARTICULAR CK&S for product advice is; ‘that the person has the capabilities equivalent to the qualification OUTCOMES of the relevant strand’ within the L5 qual (e.g. 15-19 of 'General Insurance Strand') – not that they must HAVE the Level 5 qual.
I encourage Advisers to read the Final Code, including the commentary for each standard (we are apparently capable of understanding a policy or proposal. Surely an 8-page Code, designed to support a trade cert-level qual isn’t beyond us).
For the first time that I can remember, a Code for advisers allows for an alternative to the cronyism around Skills Org, NZQA and their affiliates. And the sole pathway with light on it here is the one that supports the status quo...
On 20 May 2019 at 11:16 am all hat, no cattle said:
What's the question here, reportthetruth?

I have one: Who do you think gets to decide that you have "the capabilities equivalent to the qualification OUTCOMES of the relevant strand’ within the L5 qual" ?

Clue: It ain't you.
On 20 May 2019 at 1:32 pm dcwhyte said:
The commentary on p.5 of the Code states that you can demonstrate the standard of CK&S "by reference to the financial advice provider’s procedures, systems and expertise." (not your own expertise) - and "by reference to an alternative
qualification or experience".

So your FAPs expertise + your experience will meet the standard.

Isn't this another way of expressing the "in aggregate" concept in the original draft?

Presumably, FMA will decide?

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