Questions over minimum standards for AFAs

The National Certificate in Financial Services Level 5, developed by ETITO, is currently the minimum qualification for those wanting to become Authorised Financial Advisers.

However, ETITO is canvassing the industry as to whether this is the appropriate standard, or whether the bar needs to be raised.

Its Financial Services Professional Development survey asked respondents to rate on an eight-point scale how strongly they agreed with certain statements, including "There is a need for a higher level (than Level 5) as the minimum standard for the AFA designation."

It also asked respondents to rate the statements that Level 5 "is pitched at the appropriate level expected of a minimum qualification for AFAs" and that it "should be minimum qualification for both RFAs and AFAs."

The survey asked respondents what type of adviser they were, what standard sets of the National Certificate of Financial Services (Level 5) they had completed, how worthwhile they were and who paid for the training.

Another question involved the business relationship between ETITO and the Financial Markets Authority, with respondents being whether they perceived "ETITO is part of the FMA" or "ETITO is totally independent of the FMA."

Michael Frampton, ETITO manager - strategy and corporate relations, has previously warned that the minimum of 20 hours continuing professional development prescribed by the Code of Conduct for AFAs wouldn't be enough for many advisers.

An adviser Good Returns spoke to was bemused by the tone of the questions around whether the minimum standard should be increased, saying ETITO would stand to benefit from such a change.

"It's a bit like asking, ‘do you still beat your wife?' If you answer yes they say ‘why?' and if you answer no they say ‘why not?'"

Comments from our readers

On 12 April 2012 at 10:05 am Headmaster said:

An entirely self-serving questionnaire from an apprentice-level training organisation.

ETITO needs to be removed from the financial advisory space altogether, as it is just an embarrassment. The minimum qualification then ought to be a tertiary degree in finance/commerce, applicable to the single designation of Registered Financial Adviser, with registration through an industry body as is the case in so many other fields.

In New Zealand, registration through an industry body is required by law in order to undertake employment in a wide range of occupations, including:

Medical Practitioner
Solicitor
Pharmacist
Dentist
Chiropractor
Architect
Nurse
Plumber
Veterinarian
Teacher
Surveyor
Optometrist
Electrician
Physiotherapist
Real Estate Agent

So, what does that suggest: ____________ Financial Adviser.

On 12 April 2012 at 11:22 am Amused said:

An adviser Good Returns spoke to was bemused by the tone of the questions around whether the minimum standard should be increased, saying ETITO would stand to benefit from such a change.

Precisely. How many times are we going to see Michael Frampton & the ETITO harp on about "minimum standards" when the real impetus has nothing to do with improving advice to consumers (the reason for regulation of the financial services industry in the first place) Many advisers would by now be getting a little sick and tired of the blatant “self-serving” agenda been pushed continuously by training organisations like the ETITO on this subject. ETITO clearly “banked” on a lot more potential revenue from the industry than they have actually earned to date and now seem to be pursuing a campaign for their betterment. It’s all looking a little desperate!

On 12 April 2012 at 11:46 am Keith said:

While I agree with Headmaster about ETITO being removed from the financial advisory space I can't quite follow the rest of the argument.
In my opinion, the field of "Financial Advice" is so diverse that one size fits all doesn't even begin to work. Sure it all deals with money but then so too does retail sales and I can't think that anyone would suggest that sales assistance at your local dress shop should be included.
The "competence,knowledge & skill" required by any adviser will be directly related to the areas they give advice in and for many areas that would be nowhere near a degree level; for example mum & dad insurance or KiwiSaver.
However, I wouldn't argue against a far higher skill level required for lump-sum investment.
I also couldn't follow the argument about registration through an industry body and the list. Don't we have to be registered on the FSPR?
Headmaster says "The minimum qualification then ought to be a tertiary degree in finance/commerce, applicable to the single designation of Registered Financial Adviser,with registration through an industry body as is the case in so many other fields" and then lists a number of occupations only some of which require a degree.
Let's make it simple - everyone registered as "Financial Adviser (field(s))" with study & qualification relevant to that field.
e.g. Financial Adviser (Investment, Life Risks, Mortgages)
That way the client will know exactly what the adviser is qualified to give advice on.

On 12 April 2012 at 2:57 pm w k said:

@Keith, re your last 2 sentences, we're of the same mind. I've already suggested that to Simon power when he was minister of commerce in Aug 2010 - he replied, and without a question, that suggestion has gone to the bin.

Someone tell me, when was the last time advisers came up with brilliant idea/s was/were adopted by the regulators? They asked for "suggestions and feedbacks" just to go through the motion. This is to show that they are "open" to ideas, really? All i can say is that everything has already been decided way before that. You think the regulators will listen us advisers? It's like wait till India or China beat all blacks in the rugby world cup.

On 12 April 2012 at 3:57 pm Murray Weatherston said:

Naked self interest at play again.

First 20 hours CPD aren't enough. Now Level 5 isn't high enough. Next will probably be a plaint that there should be 26 hours in a day.....

The qualification entry level and the minimum CPD requirement are the concern of the Code Committee, not the Industry training body.

Given that the new regime is only 9 months old, and there don't appear to be a lot of consumer complaints, surely the old adage "if it ain't broke, don't fix it" should apply.

I hope the modern equivalents of Gaius Petronius's targets don't get to hold sway until I have retired.....

On 13 April 2012 at 2:15 pm wkr said:

Well said Murray. Well said indeed.

On 13 April 2012 at 3:58 pm Peter said:

Accountants and solicitors must be included within the regime. I have seen many examples over the last 12 months of these pople stepping outside their professional knowledge and offering 'financial advice' to naiive clients who have a misplaced respect for their knowledge.
Unfortunately they are currently running amok and the old adage "ignorance is bliss" has never been more applicable. The same applies to Real Estate agents who hold themselves out to be investment specialists.

Questions over minimum standards for AFAs

Is Level Five enough? That's the question industry training body ETITO is asking the financial services industry in a wide-ranging questionnaire on adviser qualifications.

Thursday, April 12th 2012, 6:44AM 8 Comments

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