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The benefits of being a QFE adviser

Some advisers turn their noses up at belonging to a QFE because they don't understand the benefits it involves, according to one QFE adviser.

Friday, June 15th 2012, 6:00AM 14 Comments

by Niko Kloeten

The adviser spoke to Good Returns on the condition that his name and that of the QFE he operates under wouldn't be published.

He said some industry peers had reacted with surprise when told of his decision to be a QFE adviser rather than a registered or authorised financial adviser: "Some of them look at you as if you've just grown two heads."

But the adviser said that under his QFE, with whom he had an existing relationship going back several years, he has been able to "carry on doing business the way I did before" instead of having to become an AFA or drop the investment/KiwiSaver side of the business and become an RFA.

He said there were "obvious attractions" such as not having to pay the costs associated with registration and authorisation, but other advisers he had spoken to had misperceptions about what becoming a QFE adviser involves.

"They think there must be some restriction on what you can do in terms of business but there really isn't.  The QFE agreement I've got allows me to deal in all the areas I have traditionally operated in... why would I want to pay $500 to a dispute resolution scheme?"

Despite this he said being part of a QFE is no easy ride, as QFE advisers are "probably more closely monitored than RFAs: AFAs have audits from the FMA and we have audits from our QFE."

And other advisers aren't the only ones confused about QFEs, he said.

"The biggest issue has been with product suppliers who say 'you're not on the [financial service providers] register, what is your registration number?'  A couple of them have scratched their heads when I've told them I don't have one."

Niko Kloeten can be contacted at niko@goodreturns.co.nz

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Comments from our readers

On 15 June 2012 at 8:24 am billy the broker said:
Good on this guy for making his choice. Obviously it works for him, plus he has no costs. Lucky man!! As for audits that is now part and parcel of the game, we all should embrace it or be left behind.
On 15 June 2012 at 8:47 am Gecko said:
Who is this person kidding
Only two days ago I saw risk advice given by a QFE adviser on the back of a business card, no disclosure document, no scope of service. We are preparing our complaint the FMA at present on behalf of the client.
Then a month ago I saw advice from a bank adviser (QFE) who was advising clients into non bank approved product, unresearched mezzanine property vehicles with big remuneration kick backs.
The QFE's have the same issues and will see the same fines as the UK. Controlling and keeping complaint a huge group of advisers is not easy as detailed in the illegal advice above.
On 15 June 2012 at 9:03 am Flite said:
I've recently given up my AFA status and am now operating under a QFE. How has this effected my business? Well my costs have dropped significantly and the back office support I now have has grown significantly. I'm now writing more business than I was as an AFA and the client experience is essentially the same. If anything I'm finding clients more comfortable knowing that I operate under a QFE than they were when I was AFA. The difference here, I believe is that there isn't a big understanding of what AFA means out in the "world", and without that customer understanding there isn't a lot of customer value attached to the AFA tag.
On 15 June 2012 at 9:37 am Mike said:
A little confusing...I was under the impression that to provide invstment advice, even under a QFE, an adviser still needs to be a personally registered AFA. Can someone please elucidate where I've misunderstood the regulations?
On 15 June 2012 at 12:52 pm Forthright said:
The article is a little vague on what areas of advice the QFE Adviser provides. The FA Act is clear, a QFE Adviser can only provide personalised advice to a retail client for Category 1 products where the QFE IS THE PRODUCT PROVIDER. A QFE Adviser can also provide a class service to a retail client as well as financial adviser services to wholesale clients. Therefore if the QFE Adviser is providing personalised advice on Category 1 products where the QFE is not the product provider, I imagine the FMA would be very interested to know about it.
On 15 June 2012 at 1:19 pm Mark Jory said:
Answering Mike, QFE Advisers can advise on any financial product without being an individual AFA providing it is only product produced by that QFE and have received appropriate training on that product and area of financial advice from the QFE.

I would be surprised if this QFE Adviser is giving advice on products not produced by his QFE.
On 15 June 2012 at 2:29 pm Niko Kloeten said:
Mike, QFE advisers can provide advice on KiwiSaver and other investment products offered by their QFE, but they can't offer personalised advice.

This means they can talk about the products but can't say whether they will be suited to the client's individual needs.

They need to be an AFA if they want to provide advice on any investment products from outside their QFE.
On 15 June 2012 at 2:59 pm Karen said:
Mike, a QFE adviser may advise on investment products promoted and/or issued by the QFE without being an AFA. The QFE is responsible for ensuring the adviser is adequately trained and is accountable to the FMA for the advice.
On 15 June 2012 at 4:17 pm Amused said:
Correct Flite. Customers by in large wouldn't have the foggiest idea what the title AFA means. That goes for RFA and QFE also mind you. I seriously doubt many would care either what title their adviser may happen have on their business card as long as they trust that individual and they know they have their best interests at heart. Generally its “common sense “ not to listen to someone whom you think is leading you down the garden path especially when it comes financial matters.

The AFA tag from day one was pushed on advisers as the new "minimum standard" to aim for as consumers themselves would be demanding it.... To date that has clearly not happened and without sounding arrogant I doubt it ever will.
On 15 June 2012 at 5:13 pm billy the broker said:
@ Gecko...what are you AFA or RFA?? There is a big difference between the two. RFAs don't actually have to do everything that you have stated above apart from giving a disclosure statement and showing due care and diligence with the client. But a sign off is a good idea, as for scope of service, that is not needed either unless your AFA.
Or have I got this wrong??
Opinion please:)
On 18 June 2012 at 12:58 pm Mike said:
Billy the Broker - I'm RFA and always do a signed-off Scope of Service, and a signed-off Statement of Advice, providing Authority to Proceed and notation of any variations from the advice and reasons for those variations. Seems pretty dumb not to. I'm currently dealing with a client that we reviewed & restructured 2 years ago. Someone else has got in under the radar and is telling this guy that the policies in place "are not in your best interests". However, this 'adviser' has not provided any written advice (at least, not as yet). His credibility with this client is severely reduced, as I have copied the initial advice & subsequent documentation around the whole process.
On 19 June 2012 at 10:24 am billy the broker said:
Good comments Mike. I know clients can be really fickle and stupid sometimes, but don't you find it really annoying after you do a really good job that they let some bozo in the door to review what you have put in place, and there are some great agents out there who love to bad mouth their competition. Not a good look. Personally I am not really a fan of coming across and having to deal with other brokers business, sometimes it just gets to messy:( But thanks again Mike for your comments:)
On 19 June 2012 at 1:42 pm Mike said:
@ Billy - I don't share your view...a "really great agent" should not be bad mouthing the competition. I've had feedback from another adviser recently who, having come across a client of mine, contact me to say that he couldn't fault it, and had told the client that too. So, this bozo who is currently trying to get into this client (mentioned earlier) had better have his ducks in a row.
On 20 June 2012 at 9:55 am billy the broker said:
Well good luck with that issue Mike.Hope you get it resolved.

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