More AFAs and Govt eyeing ways to keep them

New statistics from the Financial Markets Authority show that more authorised financial advisers joined the industry than left over the 12 months to June 30.

Monday, March 27th 2017, 6:00AM

by Susan Edmunds

Over the year, 120 people became AFAs while 80 gave up their authorisation.

That is a reversal from other years when the data has been collected. In 2015, 90 AFAs joined and 110 left.

The Financial Markets Authority has released the data, gathered from advisers' annual information returns.

There have been some other changes to the make-up of the industry. AFAs are now much less likely to have more than 300 clients, compared to when the data was first reported in 2014.

There has also been a substantial drop in the number of advisers with client assets between $1 million and $5m. The number of advisers with client assets worth more than $100m has risen since last year.

Only 14% of advisers are in a sole-adviser practice. A third are in a QFE, although this proportion is falling. Almost a quarter were working for a business that was not a QFE and 22% were shareholders or directors in a firm with more than one adviser.

A third had been in the industry for more than 20 years.

Of advisers who do not work for a QFE, more than half receive commission for their work and one in five get more than half of their commission and bonuses from one product provider.

Only 20% who work for a QFE are paid commission.

"For the first time, we have fewer AFAs receiving soft commissions or on volume bonuses and targets," said FMA head of regulation Liam Mason.

"It's too early to tell but it will be interesting to see if it signals a shift in the market over the longer-term as we move into new conduct and client-first obligations, how that might influence the way people are paid as well."

More than half the AFAs provide advice about joining or transferring to just one KiwiSaver scheme. That is up from 47% in 2014. Most had given advice of any sort about KiwiSaver to fewer than 10 clients in the year.

The percentage offering advice about between two and four schemes fell from 41% in 2014 to 35% in 2016.

Mason said that indicated that people must be getting information about KiwiSaver from sources other than financial advisers.

Most AFAs offer advice on insurance - and about half offer advice on the replacement of insurance products to between one and 10 clients a year.

The data showed there were about four AFAs for every 10,000 people in New Zealand.

Mason said that highlighted how many people were not getting access to advice.

He said the Government was conscious in drawing the draft of the Financial Services Legislation Amendment Bill that it did not want to drive existing advisers from the market.

It had asked additional questions about how it could make the transition as seamless and painless as possible for as many advisers as possible, he said.

Mason said it was important that legislative change did not drive business decisions.

Wellington had the highest number of AFAs per 10,000 people, followed by Otago, Auckland and Canterbury.

While the bulk of the industry is still older men, the data showed more young women becoming advisers.

Tags: financial advisers FMA