About Good Returns  |  Advertise  |  Contact Us  |  Terms & Conditions  |  RSS Feeds Other Sites:   tmmonline.nz  |   landlords.co.nz
Last Article Uploaded: Wednesday, February 26th, 10:19PM
Latest Headlines

KiwiSaver and risk, how far out of bounds are we?

I ask the question, as I have through the consultation process, as I still don’t have clarity on the connection between the FMA guidance on general advice on KiwiSaver and the new rules that will apply to us.

Monday, June 10th 2019, 8:40AM 2 Comments

Going forward, there is no class advice provision; it is the supply of information or full advice, with nothing in-between.

What organisations’ scope’ as their advice is going to be a whole different discussion for later, but class advice as we know it, is off the table.

In NZ, we have a problem with KiwiSaver and default funds, and on the most part, outside the banking grab of clients, RFA advisers have been educating clients and tidying this up.

However, we still have many KiwiSaver members who have done nothing about changing things. Some of my own clients have got to the third year of talking about it and still haven’t.

More from lack of action than a willingness to do something, an agh aspect of the whole situation given I’m not an investment adviser and have limits on what I can and cannot do.

Yes, I hear those of you muttering just do it for them, and yes, that’s the answer on the risk side I would generally take, get sign off and carry on.

However, this is a category one product, and I’m limited in what I can do for the client, they have to do it for themselves.

Moreover, this is an aspect we are all going to have to get used to in the coming months as we have borders on our scope applied through licensing constraints and other code and legal requirements.

I think what we have coming is good for New Zealand, and for good advice businesses they have little to be concerned about. What’s more of a concern is how VI organisations are going to adapt to a full advice sales channel and how smaller adviser businesses are going to get up the curve? However, as usual, I digress.

Back to KiwiSaver.

Under the new rules for KiwiSaver; being involved with a client moving from conservative to balanced or growth to conservative is a trigger for full advice.

So sitting with a client in a default scheme, without being a qualified and licensed investment adviser, is going to be limited to:

This is KiwiSaver.
This is how it works.
These are the core things you need to be thinking about.
And, you need to go figure out what you need to change/do with it or talk to an investment adviser…

The issue here is the same issue I initially had with KiwiSaver before the FMA guidance as an RFA; in referring to a KiwiSaver provider, we’re implicitly recommending the product provider.

Under the new rules in referring to one of the direct KiwiSaver providers, we are going to find ourselves with similar issues of recommendation. Refer to an investment adviser, not affiliated with a KiwiSaver provider; we don’t trigger the advice burden by implying the ’better’ provider.

And no, I’m not being pedantic about this, as we have had a couple of advisers find themselves in court after referring clients to particular people when the subsequent transaction turned to custard.

Yup, the difference between a referral and a recommendation. Something a financial adviser talking about KiwiSaver is going to find it hard to differentiate, even with the right paperwork. A jury of peers will be the judge, and they don’t like paperwork that weasels out of responsibility…

The other piece that has been ignored to date, and probably should not have been, at the same time common sense dictates that there is a logical impact.

The withdrawal of KiwiSaver funds for home lending. Without the following advice about the decision and the potential long term impact on retirement savings, there’s more than a few issues here.

If a change of funds within the same fund manager triggers advice, then a withdrawal of funds should also trigger advice requirements. My understanding is that it does.

As I said earlier, it has been ignored to date as it has been a’ helpful’ solution to getting people into homes they would not have qualified for without KiwiSaver. Moreover, this has served the government’s PR machine, in the face of the noise on housing, quite well.

However, that doesn’t make the advice issue around KiwiSaver withdrawals for housing right.

For most RFA risk advisers this isn’t a concern, they don’t do lending.

However, for the mortgage advisers going forward, there is going to be a need for them to be careful around this aspect, especially if they are’ educating’ clients. There is a resulting conflict of interest if the clients lending only works if they use their KiwiSaver.

Which means that advice around the impact on retirement savings and the plans to buy a home is going to become somewhat mixed together. Also, a typical mortgage adviser is not going to have the education and licensing to cover this financial planning activity.

The more I dig into this stuff, the more I’m finding overlap with current advice models and practices if we take what has been presented to us on face value.

The FMA has been silent to date on clarifying the gap between their guidance and the new law and code on KiwiSaver.

It is time we had an update in this area so RFA advisers who have been doing KiwiSaver work can have clarity on the regulator’s view, so they can then make decisions about what they have in their businesses and what change(s) they are going to have to make.

As too, for the KiwiSaver providers, they need clarity on the impact on their businesses so they also can move to serve their clients better, as they don’t have any answers for us either.

Tags: Jon-Paul Hale

« Commissions - upfront and pendulumOur new code »

Special Offers

Comments from our readers

On 18 June 2019 at 7:52 pm MillaQT said:
Amen to that! This is likely to have a significant impact on my business and make it even more difficult for Kiwis to access information or get the help they need.
I need to have more clarity around how this is going to impact my business!
On 19 June 2019 at 4:16 pm Murray Weatherston said:
I think the situation under the rules that have been promulgated so far is actually quite clear.
Under the new regime, when it is fully in place (which we can from today say will be June 2022) there is no such thing as class advice.
Kiwisaver advice has not been carved out from other investment advice. Ipso facto, from June 2022, if you want to advise your clients on which provider to use for kiwisaver, and/or which fund within a provider they should use, then from June 2022 the financial adviser (as that term is defined in FMCA) will have to be competent to be an investment adviser - other things being equal, that means NZ Cert level 5 Investment strand.
Until June 2022, an existing adviser who transitions into the new regime as a financial adviser because they were registered on FSPR as at end of May 2020 will be able to continue what they are able to do now - class advice on Kiwisaver.
A brand new financial adviser starting after June 2020 will have to have level 5 Investment strand to advise (buy sell or hold) on Kiwisaver.
I reckon it makes sense that a mortgage broker advising the client to use withdrawal from Kiwisaver for First home purchase should not need to be qualified to give Kiwisaver investment advice, but I can't recall seeing anything specific on that. maybe FMA has some exemption power to handle that.
However for a new adviser from June 2020, or an existing adviser who transitioned from June 2022, the adviser recommending either a provider switch, or a fund switch within the same provider will need to be investment strand competent.

Sign In to add your comment



Printable version  


Email to a friend
News Bites
Latest Comments
Subscribe Now

Mortgage Rates Newsletter

Daily Weekly

Previous News
Most Commented On
Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
ANZ 5.19 3.95 4.15 4.49
ANZ Special - 3.45 3.65 3.99
ASB Bank 5.20 3.89 4.05 4.39
ASB Bank Special - 3.39 3.55 3.89
Bluestone 4.44 4.44 4.29 4.34
BNZ - Classic - 3.49 3.55 3.89
BNZ - Mortgage One 5.90 - - -
BNZ - Rapid Repay 5.35 - - -
BNZ - Std, FlyBuys 5.30 4.45 4.35 4.55
BNZ - TotalMoney 5.30 - - -
China Construction Bank 5.50 4.70 4.80 4.95
Lender Flt 1yr 2yr 3yr
China Construction Bank Special - 3.19 3.19 3.19
Credit Union Auckland 5.95 - - -
Credit Union Baywide 5.65 4.75 4.75 -
Credit Union North 6.45 - - -
Credit Union South 5.65 4.75 4.75 -
Finance Direct - - - -
First Credit Union 5.85 3.99 4.49 -
Heartland 6.70 7.00 7.25 7.85
Heartland Bank - Online - - - -
Heretaunga Building Society 5.75 4.65 4.80 -
HSBC Premier 5.24 3.54 3.20 3.69
Lender Flt 1yr 2yr 3yr
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 5.15 3.18 3.18 3.20
Kainga Ora 5.18 3.97 4.05 4.39
Kiwibank 5.15 4.20 4.30 4.64
Kiwibank - Capped - - - -
Kiwibank - Offset 5.15 - - -
Kiwibank Special - 3.45 3.55 3.89
Liberty 5.69 - - -
Napier Building Society - - - -
Nelson Building Society 5.70 4.25 4.15 -
Lender Flt 1yr 2yr 3yr
Pepper Money Near Prime 5.64 - 5.44 5.44
Pepper Money Prime 5.18 - 4.98 4.98
Pepper Money Specialist 7.59 - 7.39 7.39
Resimac 4.50 4.45 3.89 3.94
RESIMAC Special - - - -
SBS Bank 5.29 4.85 5.05 5.49
SBS Bank Special - 3.39 3.55 3.89
Sovereign 5.30 3.89 4.05 4.39
Sovereign Special - 3.39 3.55 3.89
The Co-operative Bank - Owner Occ 5.15 3.49 3.59 3.89
The Co-operative Bank - Standard 5.15 3.99 4.09 4.39
Lender Flt 1yr 2yr 3yr
TSB Bank 6.09 4.19 4.35 4.69
TSB Special 5.29 3.39 3.55 3.89
Wairarapa Building Society 5.50 3.95 4.05 -
Westpac 5.34 4.15 4.09 4.49
Westpac - Offset 5.34 - - -
Westpac Special - 3.39 3.55 3.99
Median 5.34 3.96 4.09 4.39

Last updated: 21 February 2020 4:32pm

News Quiz

The maximum remuneration model for Australian life insurance advisers is to be set at what?

Upfront 40% + trail 20%

Upfront 50% + trail 10%

Upfront 50% + trail 20%

Upfront 60% + trail 10%

Upfront 60% + trail 20%


About Us  |  Advertise  |  Contact Us  |  Terms & Conditions  |  Privacy Policy  |  RSS Feeds  |  Letters  |  Archive  |  Toolbox
Site by Web Developer and eyelovedesign.com