Skill level 'has dropped'
Education requirements for authorised financial advisers are leading to a vastly lower skill level in the industry than was seen before the advent of regulation, Massey University’s Mike Naylor says.
Wednesday, December 11th 2013, 6:01AM 
13 Comments
by Susan Edmunds
In his submission to the Code Committee on its rewrite of the Code of Professional Conduct for Authorised Financial Advisers, he wrote: “Prior to the Code the better financial advisers were aiming to obtain a level seven qualification, via a graduate diploma and CFP/ CLU. The need to obtain level five before getting AFA discourages new entrants from continuing on to the Level seven qualification.”
He said level five was only acceptable as an interim measure or for advisers dealing with category two products.
“The Code Committee and FMA need to make it clear that in the medium term the baseline assessment for category one advisers should be increased above level five, preferably to level seven. One of the lessons of the recent financial crisis and the collapse of finance companies is that the level of theoretical expertise required of an investment and/or financial advisers is at a high level. The level of technical competency displayed by NZ advisers has in general been low.”
The FMA highlighted similar concerns in its report on stakeholder feedback last week. It said there were broad concerns among those it spoke to that the adviser licencing requirements were not strong enough, there was a perception that insufficiently-qualified advisers were operating, that the RFA designation was meaningless and that QFE advisers were under-regulated.
IFA chief executive Nigel Tate agreed there was a problem. He said the regulations provided a baseline but it needed to be seen as that. “It’s not a measure of quality or competency.”
He said the standard was too low for financial advice to be considered a profession. A degree was needed, he said. “But I think that’s still five or 10 years away at the moment.”
Level five might be appropriate for risk advisers, he said, but when people got into more complicated products, and clients were tying up large sums of money, advisers should be qualified to at least level seven.
But he said AFA numbers were so low that the industry could not risk scaring people off by making the hurdle for entry any higher. “I don’t think we can enforce greater standards and exclude more people.”
The FMA said adjusting the minimum requirements was an issue for the Code Committee to consider.
But chairman David Ireland said the committee was not concerned at the moment. He said they had seen a genuine effort to raise standards and embrace professionalism among AFAs.
He said when the committee was not actively reviewing the code it was looking at things it could do to bring up standards. But he was confident that the principles in the code were a good basis for AFAs.
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More importantly let’s be honest providing financial advice for mum and dad isn’t exactly rocket science and problems in the past have little to do with skill and more about ethics. I reckon you could learn enough to do a good job and perhaps better than many in an hour, maybe two. Most of the higher levels of education are frequently spent learning about esoteric asset classes and products which have little or no relevance to mum and dad. Personally the more educated the adviser the more wary I would be. Like I said it ain’t rocket science. Now let the squealing begin.
Regards
Brent
MIMIMUM standard (AFA). It also appears the code committee are quite comfortable with that.
However, in saying that, a number of recipients of the Financial Planner of the Year award were knee deep in finance companies - go figure Mike.
Perhaps it's what we are teaching needs reviewing as well. Most advisers I meet are merely sheep offering the same expensive, active products that I have personally turned my back on.
This last year I have completed my first year of the PostGradBusStud in Financial Planning at Massey extramural, 4 papers this year and 4 papers next year. Some were 200 level and some were 300. I am aghast at the ease of these papers and that these papers are suppose prepare people for the profession of Financial Planning.
They don't.
I agreed with the fact that the minimum standard is really a very low standard, but if the post Grad is the standard then I am equally disappointed. After completing the Post Grad I cannot understand how anyone is able to make a start in our business with this qualification.
The fact is this, that the whole standard of education for financial planners should be in question and that the only way for this to happen is to have a meeting of the heads of our people to create our own standard that reflects the expectations of students and the profession.
I am ashamed of Massey and this qualification, and I am equally insulted by the IFA who have had years to put something together that could have been the pearl of our professionalism.
P.S. love your comment about conflicts of interest. Bang on!
I have three degrees (not all the same discilpline), a post graduate university diploma and industry qualifications (inter alia, CFP), none of which taught me to do a job. Their greatest value was not in the facts they taught me, many of which I've long since forgotten and most of which are no longer relevant anyway. No: the greatest benefit has been to the quality of my thinking, ability to self-learn and probably most important of all, comfort to confront and change, if necessary, views, opinions and beliefs no longer supported by the facts.
Arrogance and ignorance usually appear together and while formal, higher level, qualifications in our industry would be good, better would be to reduce the arrogance in our industry.
Reason I asked is that where I took the course (overseas), the lecturers were all practitioners and they run their own practice, with the exception of the chap teaching investments who was a fund manager. The rest were a lawyer, an accountant, a financial planner, etc, between over 10yrs & 30yrs in the business. They gave real life examples and advice based on their experience NOT just from the books. I enjoyed it and learnt a fair bit though I was already in the industry for 16-17 years when I attended the course.
I personally believe that financial planning should be taught ONLY by practitioners NOT academics (no offence intended).
From experience I agree that many qualifications teach us 'how to think' rather than facts. I had an interesting discussion with a medical doctor client the other day, who is exasperated to meet some doctors who stop learning when they get their qualification and 'check the book' for instructions in what to do with their clients.
As with other professions we need to continue learning and applying our thinking skills. @wk, agree that delivery of education by real life practitioners can add immense value, if they are adept at their work.
I guess that means that you will now simply be ashamed but not insulted.
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