Aon selling KiwiSaver through RFAs

Aon has developed a unique way of promoting its KiwiSaver scheme, giving Registered Financial Advisers a disclaimer that allows them to inform clients about the scheme without advising on it.

Tuesday, March 27th 2012, 6:00AM 19 Comments

by Niko Kloeten

Good Returns has obtained a copy of the disclaimer, which asks clients to acknowledge that the RFA they spoke to only provided them with "a copy of the AonSaver KiwiSaver Investment Statement and/or factual information about the scheme".

Clients are also asked to confirm their adviser "did not take your particular situation or goals into account when providing you with any recommendations or opinions in relation to joining the Aon KiwiSaver scheme."

This is because under the Financial Advisers Act, RFAs can provide "information" on category one investment products such as KiwiSaver but they can't provide personalised "advice".

Aon's disclaimer also recommends clients seek professional advice from an Authorised Financial Adviser (AFA) which takes into account their personal circumstances before making an investment decision.

In conjunction with the disclaimer, Aon has provided guidelines for RFAs including step two: "Establish from client if they are in KiwiSaver and if they know that Aon has a KiwiSaver Scheme".

Step three says: "Offer to provide information on the AonSaver KiwiSaver Scheme and give the client a copy of:
a. The AonSaver Investment Statement;
b. The KiwiSaver in a Nutshell brochure;
c. Morningstar performances - Independent from Aon; and
d. Any other authorised marketing material available at the time."

Advisers are also told to "Only provide recommendations or opinions in relation to the AonSaver KiwiSaver Scheme based on your own preference for the Scheme, i.e. why it is your preferred KiwiSaver Scheme."

Amanda Beeslaar, sales manager for AonSaver, said the disclaimer had received a positive response from RFAs.

"RFAs appreciate the ability to provide information on KiwiSaver to their clients without giving advice. The Disclaimer ensures the clients are aware of the restrictions on RFAs and that they are unable to provide "personalised advice"."

She said the wordings for the disclaimer and guidelines were developed after "extensive discussions" with Aon's legal advisers (law firm Chapman Tripp).

"Advice is not personalised merely because a client comes within a class of persons having pre-defined characteristics and the RFA takes the fact that the client comes within that class into account.

"So long as the advice is not personalised in respect of the particular client, and that is made clear to the client, our legal advice was that an independent RFA can provide non-personalised "class" financial advice under the FAA."

Niko Kloeten can be contacted at niko@goodreturns.co.nz

« [Weekly wrap] Bad news for QROPS providers

Managers warn against more KiwiSaver regulation »

Special Offers

Comments from our readers

On 27 March 2012 at 7:16 am Bazza said:

That is walking the regulatory tight rope, I wonder what the safety net is like? Free legal support from Chapman Tripp and robust PI cover from AON? I would have thought the test of personalised advice would have been what the client thought they were getting.

On 27 March 2012 at 9:38 am Dirty Harry said:

Well there are supposedly going to be some mystery shoppers around checking that people are sticking to the rules.... but the industry doesn't know quite what to expect. At least somebody is prepared to stand up and wave a great big flag at the FMA that says "Come and Mystery Shop US!!!"

On 27 March 2012 at 10:30 am Mike Shaw said:

AON needs to ask if they are good corporate citizens. In my view they have simply found a way to mount a legal argument to circumvent the intent of a very good principle based system.

AON also needs to ask, whose interests they are putting first, AON’s, RFA’s or the clients?

If AON believes clients should seek professional advice from an AFA, then they shouldn’t be looking to create short cuts and cheats to get a leg up on other KiwiSaver providers.

I say shame on you AON.

On 27 March 2012 at 5:46 pm Ron Flood said:

More good form from AON, the company that offered to churn life business from one company to another "on a like for like basis without requiring medical evidence".
Refer http://www.goodreturns.co.nz/article/976497078/aon-accused-of-churning-insurance-customers.html

On 27 March 2012 at 8:46 pm skeptical said:

Have Aon and Chapman Tripp reviewed the FMA's guideline on ensuring that advisers do a complete analysis of the differences between the existing financial arrangement that a client is in, as compared to the new arrangement that they are being 'sold'?

I suggest it might be worthwhile for both Aon and Chapman Tripp to review the obligations of any financial adviser under the new legislation with this 'guideline' in mind - particularly in reference to 'flogging' KiwiSaver to unsuspecting clients.

Do you think it is clear that the obligations on a registered financial adviser as compared to an AFA are actually going to be that different when the issue is in front of a court or disputes tribunal?

On 27 March 2012 at 8:51 pm Frustrated said:

It is my understanding that Aon are not a QFE either - FMA have made it clear that Class advice is where you are unable to identify the person i.e. you don't have their name, d.o.b, address etc - AON would fail this test. KiwiSaver should be taken out of the RFA space - QFEs should not exist as they are also a vehicle for hiding this sort of bad behaviour. When are FMA going to address these issues in the public arena.

On 28 March 2012 at 10:08 am Bangera said:

Point 1: Accepted rationale; Investing in KiwiSaver is good for the individual and the country.
Point 2: Making access to KiwiSaver easy is important for ensuring take-up of KiwiSaver.
Point 3: More RFAs providing information about KiwiSaver and reinforcing to the client that they seek personalised advice where they need to understand the best scheme to invest in, is a good outcome.
Point 4: People need to take some responsibility for their future and keep a track of how their scheme is performing and switch when risks and returns are not favourable. KiwiSaver is not lotto; it’s like a drop of rain that goes to make an ocean. It is a slow and long term saving.

I would rather prefer it be this way, then making access to KiwiSaver difficult.

The issue for me would be if the RFAs displays misleading conduct and does not proactively make the client aware that they speak to an AFA & direct them to one for personalised advice in their quest to sell a particular scheme over the other.

On 28 March 2012 at 10:10 am Headmaster said:

Bazza, if you think that the test for personalised advice is what the client thinks they are getting then it is apparent that Aon is better informed than you are.

Mike Shaw, to state that another professional organisation is taking shortcuts and cheating is disgraceful. I have no association with Aon, but they have taken the correct approach by obtaining legal advice from a top-tier law firm and applying that in their day to day practices. Now, who is acting professionally here, and who isn't?

Frustrated, the only thing that shouldn't exist are AFAs. Time and again they demonstrate such a poor understanding of the law that they should not even be in the industry.

On 28 March 2012 at 11:12 am BTW said:

Headmaster, s.15(1)(b)(ii) of the FAA makes it clear that client expectation is very relevant to the test of personalised advice. Do you have a different interpretation, or were you just unaware of this provision?

On 28 March 2012 at 1:46 pm Headmaster said:

BTW, read what Bazza wrote and what I wrote in reply, not what you think we wrote.

Bazza stated that "I would have thought the test of personalised advice would have been what the client thought they were getting." That statement is plainly incorrect, and I pointed out that fact.

The test for personalised advice comprises the whole of s.15(1) of the FAA, not just a subsection of that provision.

On 28 March 2012 at 1:53 pm andrew said:

Yawn, KiwiSaver products don't belong in Category one anyway. It is not exactly rocket science.

On 28 March 2012 at 2:33 pm Bangera said:

Agree Andrew. The risk profile for each schemes are so broad based; it does not take a financial wizard to figure out what is ones risk appetite and which scheme to invest in. The real risk is in the more complex financial product space like managed funds, debt securities, derivative products etc.

On 28 March 2012 at 2:34 pm Headmaster said:

Andrew, I entirely agree, and so do many others. The legislative framework around KiwiSaver is so robust and prescriptive that it does not need the further prescriptive framework which is built around Category 1 products.

On 28 March 2012 at 6:19 pm denis said:

The big inconsistency is that the automatic enrollers don't go through any advice process at all. KS enrolment just happens to them when they change jobs. No forms. This is presumably because KS is an across-the-board Good Thing.

In that context, I struggle to understand why direct enrollers need personalised advice to enrol in KiwiSaver.

On 28 March 2012 at 7:08 pm denis said:

The big inconsistency is that the automatic en-rollers don't go through any advice process at all. KS enrollment just happens to them when they change jobs. No forms. This is presumably because KS is an across-the-board good thing.

In that context, I struggle to understand why direct en-rollers need personalised advice to enroll in KiwiSaver.

On 29 March 2012 at 8:01 am Bazza said:

Headmaster - Agreed my statement was poorly worded as it is only part of the test. Though the court cases I have been involved with Judges tend to add a lot of weight to what the client thinks and says, and the advisers need more than disclaimers to change that.

On 29 March 2012 at 9:40 am MPT Heretic said:

Bangera just what do you think KiwiSaver is if it is not a managed fund?

The problem has always been that the arbitary Cat 1 & 2 classification focused on product rather than the advice process. There will be plenty of future wealth destruction from bad decisions made by Kiwisavers whether they get there via auto enrollment or an RFA product flog.

On 29 March 2012 at 2:56 pm Frustrated said:

Headmaster - your view of AFAs is unfortunate as well as being incorrect - we are not all financial planners nor have some of us (quite a few I imagine) ever recommended finance companies and the likes. We do not all work for big corporates many (not as many as I would have hoped) are advisers that provide Risk, Super, KS and some investment assistance to our clients and therefore have to and wanted to be AFAs. KiwiSaver funds will become quite large as time goes on and clients will require good advice as to how to handle this what funds are best for them instead of chasing returns. I have been led to believe through an industry source that at least 70% of people who invested in finance companies etc did so without using a Financial Adviser. My issue with the Aon approach is that the line between advice or not is so thin and does come down to the clients perception of what happened at the time - so why walk this fine line and have the potential of leaving clients confused this whole thing is meant to fix that.

On 2 April 2012 at 12:45 am patrick said:

What was wrong with the way it was before? I signed up 4000 KiwiSaver customers and gave them $10.00 as well. Now with the new rules I am out of a job and on a benefit at the taxpayers expense.

Commenting is closed

Printable version

Email to a friend

NZ's Financial Adviser News Centre

News

Aon selling KiwiSaver through RFAs

Aon has developed a unique way of promoting its KiwiSaver scheme, giving Registered Financial Advisers a disclaimer that allows them to inform clients about the scheme without advising on it.

Tuesday, March 27th 2012, 6:00AM 19 Comments

Comments from our readers

Commenting is closed