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Regulation change to broaden and strengthen industry: Dale-Jones

The chair of the code working group spoke to Good Returns about expectations for the regulation improvements.

Monday, March 15th 2021, 6:00AM 5 Comments

by Daniel Smith

March 15 is a pivotal moment for financial advice. Angus Dale-Jones, chair of the code working group believes that the regulation change will create widespread improvement.

“The whole philosophy of this change in legislation is to lift the game of advisers.

“When MBIE began working through this process they wanted to lift the game in two ways, and that has been central to all of the regulation changes.

“What they are trying to do is:

• improve the availability of financial advice
• and improve the quality of financial advice.

“In everything that we have done in building the code we have focused on those two words, availability and quality. In order to achieve those objectives the legislative removed barriers that had previously existed, and it created in its place one blanket legislation for all different types of advice.

“So the challenge was how do you create a code for a low barrier field, but [one that] doesn’t overdo what people are required to do to comply, but don’t under-do the protections for consumers?”

For Dale-Jones that balancing act has been maintained with three things the adviser needs to consider moving into the new regime.

1. “The first is competence. Everyone who enters the new regime will have gotten through those competence hurdles. But really where I want advisers to focus on in terms of competence is their continued professional development.

2.“The second point is for advisers to look at the standards that are about getting your overall ethical standards and conduct arrangements for your business as a whole working well. It’s not so much thinking about each individual client, but thinking about clients as a whole.

3. “The third point for advisers [is] the client care standards. These are getting the adviser to consider what they should do in every interaction with clients. What we have really tried to do with these standards is focus on tools that advisers can think about to scale what they are doing in different circumstances. The big reminder to people is to explain to your client what you are doing and what you are not doing.”

Dale-Jones believes that the code contains a built in flexibility that allows advisers to get on board with relative ease.

“The flexibility of the code is about shaping what advisers need to do in different advice situations. We tried in every standard, but particularly in the client care standard, to lay down ways in which an adviser can say, ‘Well here is where I can utilise some flexibility’.

“We have said to advisers, ‘Yes you have to comply, but here is your safety net’. As long as advisers are scoping their advice correctly it should be entirely possible to scale your advice to suit every circumstance.”

Dale-Jones views the new regime positively and believes that the code points to a future of strength across the advice industry.

“A big marker for the success of the code is how much the world of financial advice broadens. A good outcome is if we find many more different types of advice impacting different parts of the population. Some of that might be digital, some of that might be person to person.

“This code is trying to recognise to give financial advice you don’t necessarily need a full financial plan. You can have good financial advice in quite a discreet short interaction.

“If the code is being scaled between those moments of full scale advice and small moments of brief interactions, then I think that is a marker of success.”

Tags: Angus Dale-Jones Code Code Working Group regulation

« Title fight: FSCL vs Ombudsman drags onMann on a mission to diversify financial advice »

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Comments from our readers

On 15 March 2021 at 9:57 am LNF said:
Until it is a fee based activity charged to the client there will always be conflicts of interest
On 15 March 2021 at 6:11 pm JPHale said:
@LNF yes and no. Yes, commissions are a conflict. No, some advice is better than no advice.

The reality is people needing life insurance advice are doing so because they don't have the resources to cover their risks.

We know from past research that the average medical policyholder will wait for the public system if they have to pay more than $600 for their medical treatment. Which also says they don't have the cash to pay for fee based advice.

Most people have the view they have better things to spend their money on.

And Covid has been a litmus test of this where people under financial stress needing advice on premium management don't have the money to pay for that advice. A good thing service comms have been there for them.

Here's a question, in a stressed situation without the money to pay fees would you rather have people cancel cover that could protect them of have an adviser provide guidance on how to retain some cover that will work on the balance of risk and short term exposure?

For life and general insurance there is no easy answer to remuneration, but commission does the least harm of all the options.

And no, I haven't missed mortgage brokers, the difference is their fees can be funded as part of the transaction. Something that we won't have the discussion about as banks don't offer discount options for reduced costs of distribution.

On 15 March 2021 at 6:14 pm JPHale said:
This comment is the key one advisers need to be across. “The big reminder to people is to explain to your client what you are doing and what you are not doing.

Most scopes of service are too permissive and this leaves advisers open to claims they haven't do what they said they would.

Had a conversation today where a F&G broker was censured because they didn't provide life insurance advice for a client that asked for it.

They didn't scope it out and they didn't respond to the client request. Yeah, that's a risk for all of us if it's not managed
On 15 March 2021 at 10:07 pm Murray Weatherston said:
"When MBIE began working through this process they wanted to lift the game in two ways, and that has been central to all of the regulation changes."

One thing I have never been able to ascertain is who were the key people who actually drove MBIEs policy formulations and decisions.

I just dont believe that the game was run by the politicians, as we had a succession of very lowly ranked Ministers (many outside Cabinet) in the Commerce and Consumer Affairs portfolio who never seemed to make any addresses or comments outside of what their bureaucratic masters told them [yes Minister].

So who exactly were the Sir Humphreys?

Or did MBIE's policy gurus have their strings pulled by outsiders?

These are very serious questions IMHO.
On 16 March 2021 at 11:42 am Barry Read said:
Murray - The regulators feedback to MBIE was key IMHO. Though the consultation with all industry participants was wide, the regulators feedback on limitations of the previous regime, and the fact they now had the FMCA in place were key drivers.

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