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What might be coming in new version of level 5 certificate

Responsible investment and artificial intelligence are two fields of knowledge being considered for the next version of the New Zealand Certificate of Financial Services.

Wednesday, November 15th 2023, 6:00AM 27 Comments

by Andrea Malcolm

The NZCFS Level 5 version 2 is undergoing a five year review mandated by NZQA. The review is run by Ringa Hora - Workforce Development Council to ensure it remains useful and relevant.

NZQA needs to approve the new qualification and then allocate an expiry date for the current version 2. Within that time frame, education providers must have commenced providing the new approved version. In the past, that phase in period has been around 18 months but there is no guarantee it will be the same this time.

While the NZQA approves the new version it will be up to the Financial Advice Code Committee to adopt it as an industry standard.

Strategi executive director David Greenslade is on the industry working group that is reviewing level 5 version 2 with Ringa Hora.

“We are looking at the existing qualification and where we think the industry will be in five years - what sort of technology and additional skill sets advisers  will need, what legislative changes might have occurred, what client expectations are likely to be”

Soft skills and training on conduct and ethics are being considered, says Greenslade.

“A better understanding of what makes a vulnerable client, why clients engage or not with the financial advisory industry, the components of their decision making process, why some make good decisions and others poor decisions - it's all of those soft skills that help advisers better understand and customise their advice as opposed to a cookie cutter approach.”

Information on the principles and fundamentals of ethics will also be included.

“Where the code says to act with integrity and prioritise clients interests, it assumes people tangibly understand what that is because they’ve received basic ethics training.”

On the AI front, the working group is looking at information on what it is, how it is applied to financial advice, and its advantages, disadvantages and risks. Greenslade says this encompasses blockchain and cryptocurrency.

Responsible and ethical investment, ESG and greenwashing would go into the investment strand of the qualification, he says.

Concurrently NZQA is starting to move from unit standards to skill standards which are more focused on outputs than theory, says Greenslade. The aim is to make qualifications more practice-based.

He says there will be a rearranging of priorities within the curriculum so that the new version won’t take longer to complete although it may get slightly bigger. There will be bridging modules between versions 2 and 3 that current advisers will be able to do as part of CPD.

“No-one says you’ll have to do it right away. That’s why there will be a phasing period of 18 months to two years.

Challenging the process

Guy Dobson, managing director and founder of Dynamique, a company that sells systems to the wholesale market and has a spinoff providing training content to in-house financial advisers is sceptical.

He questions the need for a review right now given recent regulatory changes and thinks there is a risk of people leaving the industry. Instead he would like to see things run as they are for another few years before having a review.

He also has doubts about education providers and firms offering financial services being on the working group and wonders whether the NZQA is the right body to provide qualifications to the financial advisory industry.

“The key thing for any qualification is to make sure the outcomes for the clients are better. The changes themselves should reflect the current dynamics and environment in which financial advice is provided. At the moment it is quite a stressful environment for many financial advisers because of the state of the markets. 

“I think the key thing is the necessary base understanding but then any further changes should look at it from a client’s point of view. Treating the clients fairly is now pursued by most regulators so I think those things need to be included, but I'm not sure NZQA is the right vehicle.”

He does think treating customers fairly, ESG, climate change reporting and AI as a supporting tool are useful for advisers to know about.

Also risk management and how to explain value to clients. “That’s where I think the NZQA may not be flexible enough because things are quite fast moving and I wonder whether or not we need a separate quality assurance exam that sits aside the umbrella of the code”


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Comments from our readers

On 15 November 2023 at 7:48 am Murray Weatherston said:
Is David really "on the code committee responsible for setting the minimum education standards." No kidding?
On 15 November 2023 at 8:11 am said:
I have a couple of comments on this.

Firstly, I think the optics of Davids involvement and comments on this are challenging; it is of course entirely reasonably and fair that providers contribute feedback to the review process and content of industry education as they obviously have insight that simply isn't available elsewhere. However it is important that the inherent conflict of their involvement is recognised and that their viewpoint is balanced with that of industry participants, suppliers, and consumers.

Secondly, I think that usefulness of including topics such as AI in a qualification at this level is questionable, for a couple of reasons. For one, it's hard to see how a cert like this can do anything other than pay superficial lip service to the topic. Two, its far from clear at this stage what role AI will actually play in the economy as a whole, let alone specific sectors, so any content on this will be at best speculating - and its hard to see how that serves a useful purpose. For "bleeding edge' topics like this my view is that shorter-form CPD that can change and update on a fair more frequent basis is a more appropriate avenue for delivery - such as FANZ or IoD webinars.

I think that Davids comments on SRI and soft skills are fine, noting that SRI appears to be a growing regulatory issue, it would be important that any content on this is appropriately circumspect and is mindful of focus by regulators.
On 15 November 2023 at 10:39 am Eyeinthesky said:
David Greenslade is a financial adviser. He is also a director and shareholder of Strategi.

I have three questions in the interests of disclosure, that I feel the industry should have had from David already, as a result of him being on the working group:

As a result of changes to Level 5, what is the likely income to both Strategi and David as a result of any changes to level 5, by requiring advisers to get the new qualification? I would be very surprised if David hasn’t already at the very least estimated this.

Does he consider there is any conflict of interest with him being involved in the review by the industry working group providing advice on the new Level 5 qualification, given he is on the working group?

Did David ask to be on, or proactively seek a position on the working group, or was he appointed/invited?
On 15 November 2023 at 12:44 pm Backstage said:
I am not quite sure what Guy means. I am also not sure why people would react to David being on a "working group". Guy mentions "a clients point of view" explain that? Is that like the patient telling the doctor what they have and need? My experience is we gently lead the client to the solution that is best for them, soft skills.

I have known David for years and sure, he is commercial, aren't we? He has an excellent comprehension of our industry and if you take time 1:1 to meet and listen to him he also has incredible insight. I am not confident that a polytechnic has that same comprehension.

Evolving the course is best and probably in line with a better client outcomes. Lets face it, it is only an L5 paper, very basic learning despite many advisers posing on LinkedIn holding their cert like they have just qualified as a surgeon.

My experience of the material produced from Strategi is generally of a much higher standard than any other institution.
On 15 November 2023 at 1:19 pm Aggressively_passive said:
Maybe version Three should have extensive course material covering conflicts of interest....
On 15 November 2023 at 3:31 pm Backstage said:
@aggressively-passive, it already does and any commission you receive is considered a conflict. Should a Landlord be on a Landlords Association? I mean, you can draw long bows. It has been disclosed David is on the working group. Wouldn't Strategi eventually benefit financially whether he was or wasnt?
On 15 November 2023 at 5:25 pm Murray Weatherston said:
I see my original question has been answered by an update to the text (why doesn't GR signpost where changes have been made in updates to stories?)

It would be nice to know who all the people on the industry working group have been.

And with tongue clearly in cheek, I wonder why TOW, climate change, CRT, and gender issues inter alia have not been foreshadowed as additional topics to be studied as well!
On 15 November 2023 at 7:30 pm John Milner said:
I’m with @Backstage on this regarding David Greenslade. He would be one of the hardest working individuals I have ever met. He has built and sold several successful financial service businesses, spent years building one of NZ’s biggest compliance companies, and has more qualifications than most advisers can count to. That didn’t just fall out of the sky for him. As he has sat on both sides of the fence now and seems an obvious choice in this role.

As we are a small nation, it is inevitable we will get situations like this, where talent is hard to find and there are cross overs. Asking David to disclose income is as ridiculous as there are as many advisers sitting on the entry level qualification of level 5. We have an industry of advisers, kicking and screaming to remain average.
On 16 November 2023 at 6:49 am Pragmatic said:
I also agree with @John Milner, having also known David for (literally) decades. Isn’t he exactly the knowledge that this working group needs?
On 16 November 2023 at 10:49 am lifeadviser1 said:
David isn't alone on the Code Committee working group involved with the review: there are also 3 members from Professional IQ, 2 from the Open Polytech, and one from Massey University.

Great news - we're in safe hands; there are plenty of foxes guarding the henhouse.

On 16 November 2023 at 11:18 am JPHale said:
My two pence, it needs a review to align the academic view to the real world. Many advisers that have done Level 5 have said they answered the backward questions to get the qualification and then gone on to do what they have always done.

One adviser I talked to 2 days ago has said they got a number of investment strand questions wrong, yet the answers to those same questions listed on professional adviser business websites are the the answers this adviser gave.

It's not that the adviser got it wrong or the professional sites have it wrong, it's the tick boxing qualifications framework set by NZQA that doesn't align with the industry.

So more the merrier with qualified practicing professionals providing advice on this review, NZQA clearly didn't do this the first time round!
On 16 November 2023 at 12:17 pm Amused said:
Fully in agreement with those comments above expressing concern about the appropriateness of Mr Greenslade being on the industry working group that is currently reviewing level 5 version 2 with Ringa Hora.

@Lifeadviser1 - your comment should be raising a few eyebrows here also.

On another issue advisers should google Ringa Hora - Workforce Development Council and see what you make of them being involved in the review process by NZQA. I don't think advisers will fully understand their involvement in determing the educational requirements for us when we provide financial advice to our clients.
On 16 November 2023 at 1:14 pm valkyrie6 said:
This will kill the adviser Industry in NZ, to have a person who profits from his own training provider company, reviewing what training needs are required for financial advisers, partnering with an NZQA appointed organisation that clearly are not qualified or under stand the financial advisor industry and clearly have there own ideological agenda based on their following back grounds ..
Māori Economic Development Advisory Board, Māori Language Commissioner., Māori economic development. Māori Tourism. Matariki Festival. the Māori Bankers Rōpū. operates Karaka Café ,Māori Reference Group.

NZQA -disgrace
On 16 November 2023 at 3:12 pm Backstage said:
@Amused and Lifeadviser1... who shall we have on this working group?

Explain how a fox is someone who is qualified by experience and education?

I would suggest this is a strong overreaction to a minor situation. The product needs to evolve and become relevant to today and a possible future.

I probably wouldn't want to be on that group if it was a paid gig (and not because of the personalities, just the work involved). Again, it is really a basic course, a foundation.

I listened to some academic at Massey previously over the years who had never been an adviser informing us all on how it should all be done. He had opinions on commission and methods and was quoted at times in the media.

Thank goodness folk like him are not involved. I would say good luck to the group and if they would like feedback I am sure there are many of us senior advisers that would be happy to contribute if asked and let them structure it up.
On 16 November 2023 at 4:05 pm Very Frustrated Adviser said:
Interesting article. No doubt David is a nice guy and hard worker as we all think we are - but he along with the other organisations have a serious conflict of interest.

Are there any advisers on this committee? If not why not they need to hear from participants in the real world as to what would be helpful - would have to say very few of the papers actually help in our day to day work.

None say whether AV, Indemnity or Mtge Protection Ip is the best and in what circumstances it is up to our judgement/preference as an example. For any papers to be worthwhile they should be helpful,meaningful challenge our thinking etc.

I would be interested to see what the full make up of the committee is, how much are participants being paid for recommending yet more papers that also happen to increase their business review.

Why is a review needed now - what has changed for instance with Ethics?

Yes agree that we should be continually learning but if we don't have time to earn then more will leave this industry and we have already lost too many in my opinion.
On 16 November 2023 at 7:27 pm Skeptical said:
@JpHale and I’m sure it’ll get a review, not just one as either. Given the inherent conflicts of a large portion of the panel, I’m sure we’ll see reviews (with mandatory bridging papers), new qualifications pumped out that need to be updated every year or so.

As an aside, I do find humour in the education of soft skills. Sit here and read this book about how to go and talk to people.
On 17 November 2023 at 9:41 am Backstage said:
My word, David being on a working group (fully disclosed) is hardly a serious conflict. No more a conflict than disclosed commission.

If all these folk are seriously concerned about conflict and are running about like chicken little, hand wringing and crying fowl... how is it they havent looked at the FMA Board that for some years has a member who owns a fund management business, (also disclosed). Is that a conflict or issue, or is this also helpful having someone who operates in the environment contributing.

I think detailed product training should be done by suppliers and specific suitability of types of products guided by an employer/supervisor. Ethics, well not all new folk grasp this, its helpful to include.

Again, L5 is so basic and fundamental I feel most folk commenting have overreacted about the sky falling and David becoming a billionaire by being on the working group.
On 17 November 2023 at 10:06 am JPHale said:
@Skeptical, likely many. However, the Code Working Group is the decider on what is needed, not the advice panel on the education stuff. There is a reasonable process behind this.

And no, I'm not so naive to think there won't be undue influence for self-interest, that's a given.

At the same time, ignoring the education providers' input here is taking the similar line we had with the first draft of FSLAB with no advice industry input; it's even worse than the self-interest aspects.

We do need to trust that there is sufficient external oversight and that the process does not favour any particular business or interest; at the same time, we need to get on with things too.
On 17 November 2023 at 10:25 am w k said:
@veryfrustratedadviser: well said.

it will also be nice to know how many advisers applied for those roles, who didn't get it, and on what basis they got rejected.
On 17 November 2023 at 10:50 am lifeadviser1 said:
@Very Frustrated Adviser - you ask whether there are any advisers on the committee. There are none on the Code Committee, but the consultation group members include Craig Mulholland from Apex and Susan Grant from Share NZ. These look to be the only representatives from adviser businesses. There probably could have been greater adviser representation on the consultation group, but I wonder whether many knew about the review? Expressions of interest to be involved with the review closed on August 25th, but I don't know how or where Ringa Hora sought expressions of interest.

@Backstage - you ask how a fox is someone who is qualified by education and experience? Easy - they stand to make a financial gain from those they are looking after. Many (most?) of us reading these comments are foxes in that respect. We are qualified by way of education and experience to provide financial advice. We provide advice to out clients, and if the clients act on that advice we often receive financial reward.

The difference is that we have statutory duties to put our clients' interests first, to disclose conflicts of interest, and also how we manage those conflicts of interest.

On 17 November 2023 at 11:18 am Amused said:
@veryfrustratedadviser - well said.

Respectfully for those that need a reminder about what a conflict of interest is:

“A conflict of interest occurs when an entity or individual becomes unreliable because of a clash between personal (or self-serving) interests and professional duties or responsibilities. Such a conflict occurs when a company or person has a vested interest—such as money, status, knowledge, relationships, or reputation—which puts into question whether their actions, judgment, or decision-making can be unbiased. Government agencies take conflicts of interest so seriously that they are regulated.”

There is clearly a serious conflict of interest here with Mr Greenslade and the other education providers apparently all sitting on the industry working group that is currently reviewing level 5 version 2 with Ringa Hora. These companies due to their key business activity have an interest in seeing adviser’s complete additional study towards a new level 5 version 2 if the FMA ultimately requires financial advisers to sit the new version of the qualification later.

As someone else said any new content must demonstrate clear relevancy to both advisers and the consumer otherwise this review of level 5 risks becoming focussed on revenue generation than actual education and professionalism, hence the concerns being expressed by advisers about a conflict-of-interest scenario.

Finally once again it’s advisers themselves and not our supposed “industry advocates” that are speaking out about the above. Why are the associations and aggregators silent and not challenging this now for their members?

On 17 November 2023 at 12:01 pm Amused said:
@lifeadviser1 - very well said.

Do we actually know why NZQA decided to include Ringa Hora in the review process? Persumably the NZ taxpayer is now footing the bill for their involvement. Advisers should google Ringa Hora - Workforce Development Council. I don't think advisers will fully understand their involvement in determing the educational requirements for us when we provide financial advice to our clients. Respectfully their involvement seems to be a hangover from the last Government. The very important point of there being sufficient external oversight and that the review process does not favour any particular business or interest has been raised above by @JPHale.

On 17 November 2023 at 12:23 pm Backstage said:
@lifeadviser1, that was a very good answer. Do you really feel though that there is massive financial gain to be had from Davids involvement, he (if it is him personally you are concerned about) will benefit anyway as he has an interest in a learning institute and the product will evolve. NZ is so small and conflicts will occur and need to weighed. A I mentioned, no one seems to care that a current FMA Board Member has ownership in a fund management business. By the way, I am not bothered by that and I think on or in both instances these individuals will conduct themselves in a proper manner.

Havent we all been in circumstances where we have had to stand aside for a moment on a project and just say, for this reason on that matter, I may have to leave the room?
On 17 November 2023 at 3:16 pm lifeadviser1 said:
@Backstage - I am definitely not concerned about David personally - I don't know him. Again can only assume that when others hold him in high regard that he has done something to deserve this.

My concern is driven from the perspective of advisers and adviser businesses, who have just been through three years of regulatory change and expense, where they have had to become licensed, get registered, get through the L5v2 qualification, and now face ongoing compliance costs and burden that weren't around prior to 15th March 2021. The dust has barely settled and now we are being told that the qualification that was fit for purpose on March 15th this year needs an overhaul, at additional cost to advisers/adviser businesses?

I firmly believe we must exercise evidence-based decision making in this industry. We base our client recommendations on evidence about their particular situation, needs, and risk profile. We gather evidence about the various product solutions, and recommend the solution that we assess has the best evidence of achieving a good customer outcome. Where is the evidence we need a new/updated qualification?

The L5v2 qualification was last reviewed in January 2019. I believe the "Closing the Gaps" bridging course came out around about the time the new regime took effect (March 2021). Fair play, this bridging course was in response to a very obvious gap that had opened up, between the previous and current regulatory environments. Evidentiary criterion met.

But I wonder what further gaps have opened up in the last 2 years? A couple of the suggested topics are training in ethics and soft skills. Where is the evidence of a gap here, such that it must be filled with compulsory education as opposed to voluntary CPD?

Concerns about material conflicts of interest aside, I think that there is still a worry about implicit bias here, especially given how heavily the review committee is stacked with educators. An educator's tool is education, and so there may be some unconscious tendency towards looking for problems that education can fix, where no such problems exist. As the saying goes, if the only tool you have is a hammer, you tend to see every problem as a nail.

Happy to put my name to this comment,

Paul Flood.

On 17 November 2023 at 4:46 pm Amused said:
@lifeadviser1 - Paul that would have to be one of the best reader comments I have seen posted on Good Returns regarding the subject of regulation. Thank you.

Wish we had you on the working group involved in the NZCFS review.
On 22 December 2023 at 1:29 pm Murray Weatherston said:
How many financial advisers have had a look at the revised document for Level 5 version 3.
Incidentally it seems obscene to drop a review into circulation mid December and have a closing date for submissions February 9!
Also I wish when reviews are published, they show the amemndments from the previous version (like Parliamentary Bills).
I've had a quick skim and the thing that I noticed most was the addition of "regulator guidance" into lists. I think its Minter Ellison who has just published a piece on the creep or elevation of regulator guidance into the regulatory framework.
Actually there doesn't seem to be a lot of material change for draft version 3.
So I wonder how ESG and climate change and geneder politics get included in what is likely to be taught?
On 22 December 2023 at 1:30 pm Murray Weatherston said:
How many financial advisers have had a look at the revised document for Level 5 version 3.

Incidentally it seems obscene to drop a review into circulation mid December and have a closing date for submissions February 9!

Also I wish when reviews are published, they show the amemndments from the previous version (like Parliamentary Bills).

I've had a quick skim and the thing that I noticed most was the addition of "regulator guidance" into lists. I think its Minter Ellison who has just published a piece on the creep or elevation of regulator guidance into the regulatory framework.

Actually there doesn't seem to be a lot of material change for draft version 3.

So I wonder how ESG and climate change and geneder politics get included in what is likely to be taught?

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