New tricks for the watchdog too
The fast-approaching new regulatory dawn not only presents challenges to advisers but regulators as well.
Wednesday, March 16th 2011, 7:27AM 
12 Comments
by Benn Bathgate
"Not knowing a lot about the market we're about to regulate is a bit uncomfortable," said Securities Commission manager Mel Hewitson.
She was speaking at the IFA Professional Development Seminar in Matamata where she gave advisers some pointers on the authorisation process, what to expect and how to prepare for the new post July 1 environment.
Speaking about the Standard Set C assessment Hewitson stressed the importance advisers engage with the process as soon as possible.
She said some advisers have underestimated the amount of work required and highlighted character testimonials as a particular area where delays can occur in the process.
She said the Commission has staff on standby to deal with the rush "which hasn't happened yet."
The fact that not all advisers will pass the required assessments to become AFAs was also stressed. Hewitson said the process was taken seriously and was intended "to get the right people through the gate."
The importance of the ABS (Adviser Business Statements) was also highlighted.
"We do understand this is everyone's first attempt at writing an ABS," she said.
The main point of the document is to outline how an adviser or adviser business conducts its operations.
"That's what we're interested in. That you have thought about your obligations regarding the Code."
The role of the ABS in Commission visits was also stressed, with Hewitson saying the better the ABS, "the less likely we'll come to you hunting for information."
The Commission is likely to request to see an ABS as the first stage in any potential visit, though there exist "a whole raft of reasons why we might want to come and see you," including simply being in the area or a random selection.
Whistle blowers will receive anonymity and the role complaints will have in guiding the Commission was also highlighted.
"We'll be really reliant on complaints, we don't have hundreds of staff to go around knocking on AFA's doors," she said.
Complaints will also be useful for the Commission to study for patterns and assess whether they need to re-examine any particular areas.
Hewitson stressed that the Commission aims to be a fair partner to advisers in the new regulatory world, but that "we won't tolerate those that try and cheat."
"I do have a big stick but I don't have to use it," she said.
Benn Bathgate is a business reporter for ASSET and Good Returns, email story ideas to benn@goodreturns.co.nz
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Comments from our readers
We should all thank our lucky stars that people not in the medical field are not telling our doctors how medical procedures should be done.
I'm still struggling to understand why our industry's regulation is set by people who don't understand the trade, but not others (real estate, motor, health, legal, accounting, building, etc)? Or did I miss something?
Having now gone through the process of becoming authorised myself all I’ve seen to date is a whole lot of money changing hands for very little net gain for the consumer. I seriously doubt the likes of accountants, doctors or real estate agents would have tolerated this in their respective industries.
I think Mel Hewitson was probably referring to the unknown amount of people that will be registering. Lots of people call themselves "financial advisers" but how many will get themselves authorised? No-one knows.
How many financial advisers are out there? No-one knows.
Initially, AFA will get financial advisers leapfrogging a little bit beyond real estate agents and insurance salespeople in terms of credibility.
There's still a great deal of work to do before offering financial advice is seen as a respected profession alongside solicitors and accountants. But it can be done and AFA qualification is a start.
Let's not split hairs over an isolated sentence.
Wondered how many advisors got the feeling of being "kicked in the gut" because none of you advisors are good enough or can be trusted, hence, all your feedbacks/ideas cannot be taken seriously, unlike in other professions. Or has someone engineered this whole thing with a hidden agenda.
Keep up your good work in looking after our clients, Alastar. Hope your clients will understand if you have to charge higher fees to cover your costs - all other professions do that, so the commission should not fault any advisors if they have to.
With regard to my staff, almost without exception we come from private sector financial services backgrounds including financial advice, investment management, insurance, compliance, systems & processes, accounting etc. And of course several also have regulatory experience both here and overseas. So advisers will discover during monitoring that Commission staff speak their language and understand advice models very well. We look forward to meeting you.
Your staff that I have spoken with have excellent industry knowledge and experience.
Advisers have every right to know Nick and Mel, the qualifications and experience of the people in the commission who come ‘knocking on their door’. I think a collaborative approach between advisers and the Commission is a far more appropriate response to ensure the industry remains strong and vital. There is no need to marginalise advisers or to divide the advisory force in an effort to reach a fully compliant adviser force and system. I look forward to regulation, and I look forward to working with the people of the Commission in a spirit of collegiality not fear
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This opening statement says it all.
Unfortunately AFA's are going to have to continue to pay the price of this as the Commission asks for screeds of information and statistics from advisers so that they can try and understand how the industry operates.