Locums strongly recommended for advisers

Advisers have been given strong advice to have a locum at the ready when running their mortgage business.

Tuesday, July 19th 2022, 6:00AM 1 Comment

by Eric Frykberg

That is because it could prove useful when the Financial Markets Authority (FMA) comes “knocking on the door” wanting answers to questions.

The advice came from a long-standing legal and business consultant, Tracey Cross, who was speaking at a webinar organised by the brokers lobby group, Financial Advice New Zealand.

Her comments came at a time when the locum business is very much a work in progress for the mortgage industry. It is an “ecosystem that is evolving and maturing”, according to Financial Advice NZ.

The current system falls far short of the system of medical locums. There is not a large pool of advisers available to move in at short notice to pick up the reins if an adviser falls sick or dies, or even just wants to go overseas for a long-delayed holiday.

But Financial Advice New Zealand is seeking to fix the problem by developing a register of peer-to-peer locums. These are people who would “help out a buddy in a jam” and expect reciprocation.

And making use of them is very important, according to Tracey Cross.

She said locums could preserve the value of a business by making sure clients would continue to get served when they needed it.

And without a locum agreement, there could be serious problems.

“We hear of stories where someone died and they have no plan and the spouse is left trying to deal with a business that they really have no idea about,” Cross said.

“It becomes a very stressful event.”

She cited another problem: an adviser who was part of a dealer group died, and the head FAP took over. But the banks and finance companies had an accreditation arrangement with the individual who had died, not with the head FAP, and that caused a series of legal problems.

In her talk, Cross said choosing a locum had to be done very carefully, and a lot of due diligence was needed to make sure the locum was the right person. This was time consuming and so it was essential to make plans ahead of time.

Furthermore, contracts with a locum should be sorted out by a lawyer or a compliance specialist, to deal with complex issues such as liability and the payments of unexpected costs.

In questioning, Cross declined to say how much locums would be paid, but suggested it would usually be commensurate with the rate that the person they were replacing earned.

She went on to say that costs of a locum could be minimised if there was a plan well worked out in advance.

“The more that you have your world organised for the locum to easily pick up and move forward with, the less time they need to spend and the less remuneration recovery they will expect,” she said.

“If they move into a whole schmozzle, and it is taking so many hours (to work out what to do next), they need more remuneration for it.

“By having a plan in place, there is a cost mitigation for advisers as well.”

Cross went on to point out that having an agreement with a locum was not mandatory.

But having a Business Continuity Plan (BCP) was a requirement of the FAP licensing programme and there was an indirect and growing link between the two.

“Even though a locum agreement is not a specific requirement of the BCP, we do need to be mindful that moving forward, in regard to the monitoring approach of the FMA, business continuity is an important aspect of all businesses,” she said.

“It has been considerably highlighted by this whole Covid period, it is at the forefront of the FMA's mind.

“So if the FMA comes knocking, you do want to have your story in place as to what you have got in mind for your business.”

Tags: FMA

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Comments from our readers

On 18 July 2022 at 6:18 pm two cents said:
Great. In addition to all the legal ramifications and jacked up operations costs we now need handlers?

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