Wait for categorical advice, PAA chief warns

Insurance advisers should wait for clarification from government about their status under the Financial Advisers Act (FAA) before “taking action on anything to do with regulation”, according to Dave McMillan, head of the Professional Advisers Association (PAA).

Friday, December 12th 2008, 5:26AM

by David Chaplin

McMillan said reports that performing a needs analysis alone would push insurance advisers into the more heavily-regulated category one FAA rules were premature.

“Given the lack of detail design included in the Financial Advisers Bill, it is not surprising that industry is doing its best to fill in some of the blanks. The PAA has resisted providing detailed comment on the practicalities of the Bill for advisers because the current lack of detail means that any interpretation can only be treated as speculation,” McMillan said in the PAA newsletter due out next week.

“If there is one thing we have learned on the torturous path of adviser regulation it is to wait to see the final detail before expecting advisers to act. Feedback from our members indicates that some industry players are already second guessing what might constitute an adviser being category one or two (beyond the actual products they sell).”

Institute of Financial Advisers chief executive David Hutton has told members the Securities Commission had indicated to him that carrying out a risk needs analysis would be “considered to constitute a 'financial planning service'” under the new law.

“If so, this would mean that the majority of risk advisers will need to become 'authorised',” Hutton said.

He also said the commission expected authorisation of financial advisers won't begin until June 2010 instead of the original October 2009 start date.

As well, the IFA newsletter said a discussion paper on the adviser Code of Conduct, initially due out before Christmas, would not now be published until next year.

According to Hutton, adviser competence was the main focus for the Securities Commission at the moment with education levels under consideration.

“The Securities Commission will accept a Level 5 qualification as the start point, but it is likely that over time there will be a move to set higher levels for more sophisticated classes of adviser,” he said in the newsletter.

Hutton said category two advisers might be “vulnerable” to criticism because they would have no “specific practice standards” to abide by.

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