New conditions for QFEs
The Securities Commission has published the standard conditions Qualifying Financial Entities (QFEs) will need to abide by, opening up the way for the first entities to be granted QFE status.
Thursday, December 23rd 2010, 6:15AM 
5 Comments
by Jenha White
The Securities Commission says it is currently reviewing Adviser Business Statements (ABS) from 80 prospective QFEs and the first QFE licences are expected to be granted in late January. The standard conditions come into force on January 20.
Commissioner for Financial Advisers, David Mayhew says the conditions put in place for QFEs are in line with the legislative intent that consumers should receive equivalent protection whether they choose an authorised financial adviser (AFA) or a QFE adviser.
He says the fundamental principle is that the QFE takes responsibility for the QFE adviser.
In addition to conditions about the QFE maintaining procedures to ensure retail clients receive adequate consumer protection, they specify a range of requirements including regulatory notifications, record-keeping and disclosure.
"In particular, the disclosure obligations are critical," Mayhew stressed. "We want consumers to receive meaningful information that helps them choose an adviser and decide whether to follow the advice given.
Disclosure conditions take effect from 1 July.
Mayhew says the QFE conditions were developed in consultation with industry and he acknowledges their input.
"This is one of the last building blocks for the new regime and is fundamental to promoting public confidence in their professionalism and integrity."
The standard conditions are published on the Securities Commission website - an entity must comply with the conditions from the date it becomes a QFE.
Jenha is a TPL staff reporter. jenha@tarawera.co.nz
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Comments from our readers
As per your tired,old point on giving a certain amount of production, I have not seen that request from any of the QFE's. It is certainly up to the adviser to disclose who they deal with (as part of the QFE) and to justify that to the client.
Every QFE will believe they have the best product for a variety of reasons - whether they see the product as the company and all its components or just the actual Life products it sells. Where a QFE clearly does not have a product to fit the clients situation - which can only be found from completing a full fact find and needs analysis - then I do not believe they would expect advisers to fit square pegs in round holes.
Those brokers/advisers that look to join a QFE (with the above in mind) cannot truthfully call themselves independent anymore. We’re all supposed to being in this industry looking out for our client’s best interests but if we are suddenly going to be told “where” to place a percentage of our clients then we might as well be on a salary working at a bank or insurance company instead! Being an adviser or mortgage broker is all about offering people “choice” which is part of the reason most clients choose to deal with us instead of going to the banks or insurance companies directly. In my opinion one of the key advantages an adviser or broker can have in business is in them being independent. Clients respect this! Finally mortgage brokers that align themselves to a QFE are playing with fire as you may well find that your broker agreements with certain lenders are cancelled by the banks themselves. Watch this space...
As for you saying that you don’t believe that a QFE would not expect advisers to fit square pegs into round holes you obviously haven’t dealt with the likes of AMP.
I don't care if my adviser access's different companies or not - as long as he does a good job for me. A good thing for QFE advisers would be that they don't try and transfer clients to different companies every few years - they are fully engaged and trust the company they wish to represent. I would be concerned as a client if every few years the advisers wanted to change companies to make a buck - at the same time it is up to the companies to support the adviser and make sure they create the best environment for clients.
And ... advisers cannot call themselves 'independent'
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So, when a QFE says to its own members that they MUST give it a certain amount of their risk or mortgage business to belong how is this demonstrating integrity when that QFE's product may not necessarily be the best one available in the market for the client?
If you align yourself to a QFE then you run the risk of losing your impartiality as an adviser in my opinion. You thus in effect become an employee and not an independent looking out for your client’s best interests.