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Level five isn't the big issue for advisers; It's something else

Insurance adviser Jon-Paul Hale says advisers are getting hung up on level five qualifications, when the real issues they should be focusing on are much bigger.

Wednesday, September 2nd 2020, 6:00AM 5 Comments

by Jon-Paul Hale

Jon-Paul Hale

Currently there is a substantial misunderstanding of the issues advisers are facing as we head into a new licensing regime. One of the things that have left me scratching my head for the past couple of years is the approach to transitional licensing by those intending to be advisers under the new regime.

We have had a real focus on level five qualifications, and thanks to Newpark for arranging this for their team, I have mine done, as do a good number of others that took up the offer.

Interestingly Newpark has done this twice with training advisers for level five, back in 2010/2011 and then more recently with the oncoming changes. Which is an enormous help for many advisers to get this tidied up and a significant value I have had from my dealer group.

However, this is Newpark setting the standard of membership rather than being a real issue for advisers in the immediate future.

Yes, advisers need to be qualified, understand me there. More the point; the safe harbour for existing advisers until March 2023, is for the level five qualifications. So it was not and is not the immediate need that needs to be covered.

The immediate need is complying with the new rules from FSLAA and the Code of Conduct, which seems to be the thing most people are missing.

Yes, the new rules and code expect you operating your advice at a minimum standard of level five, but the qualification is not required for two more years.

Having your level five done should help you adapt and adjust your business to meet the minimum requirements, but having the certificate does not mean you are compliant with the new rules for your advice from March 2021.

Let me be very, very clear.

As an adviser, you have to be fully compliant with the new rules and code of conduct from March 15, 2021 for your whole business. That is your systems, processes and documentation.

You have seven months to get to that point, not two years and seven months.

You have two years and seven months to get your qualifications in order, but only if you were an adviser before March 15, 2021 and you have been attached to a transitional or fully licensed FAP within 90 days of the new rules coming into place.

So comments I have heard: "I have until March 2023 to get that sorted" are entirely wrong and leave you wide open to FADC and FMA prosecution for issues resulting from your advice and/or lack of registration.

I did say pariah above ;)

What does this really look like?

1. It means you have to know your client. That means you have to have a decent needs analysis and fact find.
2. You need to do some research on the client's situation.
3. You need to do some analysis of the client situation.
4. You need to have a statement of advice; there is no class advice option in the new rules.
5. You need to document the decisions made and define the implementation plan.
6. You need to have an agreement for ongoing servicing.

With the unsaid requirements of the appropriate disclosure and terms of engagement/scope of service for that client.

It also requires you to be able to define a whole raft of things for your business

  • How you operate.
  • What your governance processes are.
  • How you handle complaints.
  • What roles do people have in your business, and what is the extent of their authority.
  • Also, who can do what and what their qualifications and experience are so that things like scope of practice and personal training and development gaps can be identified and managed.

The whole idea of "I'm an adviser, and I'm fine doing what I'm doing because I've been doing it for years" will not fly.

I've had the focus of the new requirements being the standard we were going to have to meet since I started as an adviser. And I have endured years of being told I'm overcooking it with what I'm doing.

Yet, on the flip side, I have some of the most loyal clients with a non-existent level of complaints.

Having participated in the old PAA adviser awards programme; I have also had the feedback that "How you operate is how all risk advice should be done". So it is not just me, myself, and I, with my self-inflated opinion of myself. I consult others externally for feedback every chance I can.

I was a finalist in the two years I participated, and one of those was me against Katrina Church as the only two finalists. Kat was the prior year's winner and had been through the process for six years before. So some damn good company to be competing with.

I also worked closely with Anand Srinivasan in his first couple of years, where he also picked up the "judges' excellence award for financial advice" and the "new adviser of the year" the following year.

Both off the back of the work we did on his advice process and support in the early days. We still work closely together, Anand is an excellent adviser in his own right too.

I also have little to no non-disclosure with claims, as well as little to no complaint about premium costs, including the last six months with the Partners Life increases.

Yes, some are squeaking about the impact on their budget, but not about the cost of coverage as they understand why they have the cover and what it will do for them.

And I know quite a number of advisers out there will say the same about their clients. But do they have persistency in the high 90's too?

Because of my past approach, I have little to change in my business for the new regime, and I can provide a higher level of support to my clients. That too is a significant advantage to stepping up the game to meet the minimum requirements of the new rules.

Am I going to have to make changes, yes I am. At the same time – with what I've outlined here – how does your own practice stack up?

If you can't tick all of the boxes I've suggested here, and it's not an exhaustive list either, then you are going to need to get going on sorting things out.

And if that is too challenging, outside your capability, or time availability, then that's where a good dealer group is going to come into play.

I talked about the gap – in a previous article – that is going to put pressure on dealer group existence in the next little while; the reality is that gap is from ignorance of the timing of the new rules.

And for the majority of advisers out there, being part of a dealer group is going to be necessary to get you over the line on the requirements coming due on March 15, 2021.

Hopefully, the providers sort out the certainty on how we are all being paid soon, as that is the stumbling block presently to having a decent view on what the dealer groups can do for us.

I haven't seen a provider tell us what our remuneration is going to be after March 15, 2021 yet.

We all need to know that so we can better manage how we approach the new regime with confidence and a level of certainty that we will be able to handle it.

Both for the operational risks and for the money needed to pay for it all, so it is sustainable for us to do what we do.

Tags: Dealer Groups FSLAA Jon-Paul Hale licensing new regime Opinion

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Comments from our readers

On 2 September 2020 at 5:29 pm Matron said:
Indeed, eight duties and obligations for FAPs, Code of Professional Conduct for Financial Advice Services, Regulated Financial Advice Disclosure... doesn't leave time for much else.
On 2 September 2020 at 5:54 pm The Oracle said:
Great article JP, and agree with your comments. Dealer groups are not compulsory and my business has received excellent advice and support which I try to return. I've found most top producers give of their time and advice while those less successful try to blame others for their shortcomings.

Change is coming and I say advisers sticking together and sharing ideas will create more security and opportunities than those going at it alone for a few extra dollars... Money is a outcome, not something to be chased... A hard lesson some are about to learn.
On 4 September 2020 at 8:32 am JPHale said:
@Matron & @The Oracle, thanks for the comments.

Echo the "Money is a outcome, not something to be chased... A hard lesson some are about to learn." hard and loud!
On 4 September 2020 at 10:27 am All hat no cattle said:
There are two lists above; numbered list is things that must be done.
Bullet point list is the who and the how. And in there is the secret sauce.

All most dealer groups have been doing is handing out a list of things you should do. There are some documents, and webinars, helping describe for you in granular detail what a good process, document, SoA looks like.
Yay. Thanks.
They might offer you a FAP to sit under, so they can monitor and supervise that you are doing what must be done - BUT YOU WILL STILL HAVE TO DO IT!!!
It's not the answer. Ticking all the boxes efficiently and reliably may not be possible for a large number of advisers.
You might have to get a PA. Go virtual PA. Get into cloud and apps and tech. Templates and workflows. Automation.

Look for support that is already into those things. That's the thing that should be at the top of your list of things to do.
On 5 September 2020 at 7:02 am JPHale said:
@All hat no cattle yup, and there are a lot of advisers that still need help with doing all of that stuff.

There is no doubt that there is a level of maturity that is going to have to be injected into the average adviser business that currently looks like a glorified sales office.

That is the Dunning Krugers of this that I have mentioned before.

Those that think they are ok but don't have a clue, are in trouble. And those that are at the other end of the spectrum, sit with excellent knowledge and practices wondering why everyone else isn't doing the same as them. "Surely it isn't that hard?"

Unfortunately for a lot of advisers that are selling by rote, this is very much an issue and many have no idea where to start. They don't know what they don't know and it is about to hurt.

This is where the support (providers or dealer groups) is going to be critical for their survival, they know what the list is but they don't know how to do it.

And these comments may feel like I'm insulting a large swath of people, I'm not, more I'm pointing out the massive gap between the understanding and the practical implementation.

And if you are reading this and offended by that, maybe you need to ask for a review of your operation as my comments above may well be very applicable and you just don't know any different.

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