Fine line between 'information' and 'advice'
The Financial Markets Authority is about to release draft guidance on the controversial question of what constitutes "personalised" advice on KiwiSaver
Wednesday, March 28th 2012, 6:30AM 
2 Comments
by Niko Kloeten
The issue, highlighted by a disclaimer given to Registered Financial Advisers by KiwiSaver provider Aon, revolves around how far RFAs can go when discussing KiwiSaver with clients.
It will be addressed as part of draft guidance on KiwiSaver sales and distribution, which will be published shortly.
FMA spokesman Nick Stride said the FMA wasn't aware of any other providers offering similar disclaimers to the one being used by Aon.
Although he said there was nothing legally wrong with the disclaimer, it wouldn't offer any protection to advisers who cross the line into personalised advice.
"The disclaimer is not in itself illegal. However, advisers can't contract out of the Financial Advisers Act. If an RFA did in fact provide personalised advice to the client the disclaimer would have no effect and the adviser would be in breach of the Act."
Aon's KiwiSaver distribution methods were the subject of a complaint to the Financial Markets Authority last year.
The FMA said in response to the complaint, "We are aware that within industry and the legal profession there are differing views on when a service crosses the various boundaries.
"As we formulate our views on where these boundaries lie we will be reviewing practices of various distributors and providers and it is useful that you have brought your concerns in relation to AON advisers to our attention.
"We hope to provide guidance to industry as soon as we are able and this guidance should provide a basis for assessment of whether or not the services provided cross the boundary into personalised financial advice."
An adviser who spoke to Good Returns on the condition of anonymity said the Aon disclaimer was good for clients of RFAs, many of whom didn't have access to an Authorised Financial Adviser and had poor understanding of KiwiSaver.
"I've got clients who say to me, 'I don't want to go into KiwiSaver because the government will steal my money'."
Niko Kloeten can be contacted at niko@goodreturns.co.nz
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That statement is quite untrue. RFAs, in accordance with Government's intent, are legally able to provide advice about investment products to a wide range of clients, and they are legally and objectively unrestrained from providing advice to any client about investment markets and returns. As to your “etc.”, perhaps you could enlighten us so that we can correct you on that as well.
RFAs, for example, provide investment advice on a wide range of investment products to organisations, and to trustees who act on behalf of hundreds of thousands of individuals. Collectively, RFAs provide investment product advice on asset values which far exceed the those on which AFAs provide advice. In my experience AFAs could simply not keep up with the complexity of the investment product advice routinely given by such RFAs.
AFAs only exist in order that their conduct can be regulated with respect to a particular activity, namely giving personalised advice to retail clients on certain financial products. Such regulation became necessary after ‘financial planners’ and their ilk collectively guided tens of thousands of New Zealanders to the doors of finance companies and to financial ruin. Large numbers of those financial planners are now AFAs. To attempt, as you have done, to sit in judgement over RFAs and to elevate AFAs to the level of lawyers or accountants is even more audacious than selling an elderly widow a finance company debenture.
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I don't have a problem with RFAs giving information about KiwiSaver, providing it is accurate, but I didn't believe they should receive trail commission when they cannot legally provide advice to clients about investment products, investment markets and returns, etc.