Voluntary AFAs 'ahead of the game'
Advisers who have become authorised even though they don't need to have made a smart career choice, according to Institute of Financial Advisers president Nigel Tate.
Wednesday, April 25th 2012, 5:08PM 
10 Comments
by Niko Kloeten
There are several types of Authorised Financial Adviser, including Category 2 AFAs, who must follow the AFA code of conduct but are unable to provide advice on Category 1 products including KiwiSaver.
This means they can't advise on anything beyond what a Registered Financial Adviser can, but they are held to a higher standard than an RFA on the advice they provide.
Tate spoke highly of those who have taken the path of voluntary authorisation, saying it will increase their professionalism and put them in a good position if the current regulatory requirements for advisers are ramped up at some point in the future.
He said making such a choice indicates "commitment to the profession", given it involves higher costs and liability than remaining an RFA.
"It's a real credit to those that have done it - professionally it's the right thing to do and I think they are getting ahead of the game.
"The IFA is encouraging people to, rather than having to respond or react to regulation, be ahead of it."
An increase in the minimum requirements for advisers is almost inevitable at some point, but when that will happen will depend on the political climate, Tate said.
"It is the IFA's view that over time there will be a need for a closing of the gap between authorised advisers and registered but not authorised advisers."
A knowledgeable source told Good Returns the Category 2 AFA designation came about "quite late in the development" of the Financial Advisers Act after lobbying by insurance advisers.
"They [insurance advisers] had embraced the whole thing and wanted to take the step up in professionalism but the Act was changed so most of what they did didn't require them to become an AFA."
Niko Kloeten can be contacted at niko@goodreturns.co.nz
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Comments from our readers
They also have to seriously look at QFE's and banks who can currently sell KiwiSaver and are not AFA's as well as people buying insurance and starting KiwiSaver on line and getting NO advice at all.
This is where the problem is and where people get into the wrong plans.
The argument is well documented and in the end common sense prevailed.
Graeme, as a past member of the LBA, I am surprised that you seem to have forgotten your 'roots'.
Not forgotten at all, but my roots go back beyond LBA to LUA (which I joined in 1969), that sadly was merged into what is now the IFA. Nigel's position on AFAs vs RFAs probably indicates the need for another professional body to really represent RFAs, and yes, LBA is clearly best placed to represent RFAs who deal in life risk products.
The LBA, whilst Ron was President did an excellent job of representing professional life risk advisers, resulting in the RFA regime we operate under.
Surely an AFA should be more balanced and advice a prudent spread and diversified ownership amongst all asset classes. This is confusing to the market as AFAs are meant to be consider the clients best interests and often property will not be the best. Newland and the Property Tutors are not fit or skilled to advise on non-property asset classes and should not be AFAs.
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