FMA takes hard line on KiwiSaver advice
The Financial Markets Authority's view on KiwiSaver distribution is likely to spark strong debate in the industry, a financial services law expert predicts.
Tuesday, June 26th 2012, 6:00AM 
3 Comments
by Niko Kloeten
The FMA yesterday unveiled its first draft guidance note on an issue that has been causing plenty of discussion in the industry: when does information-only KiwiSaver selling become class advice, and when does that advice become personalised?
And according to Chapman Tripp partner Mike Woodbury, there are some parts of the note that will likely be put under the microscope by industry players.
"I think there are going to be certain concepts in the guidance note that are likely to be scrutinised closely by the industry and might invite debate as to whether there is legislative support for them," he said.
One of these, he said, was the FMA's view that a recommendation or opinion could be given "by implication".
He also pointed to the FMA's view around transferring a KiwiSaver member from one fund in a scheme to another fund in the same scheme.
"It seems debatable at least whether the view that that is financial advice is supported by legislation," he said.
"If the person is already a KiwiSaver member it may not be correct to say that transferring from one investment product in the scheme to another is advice under the Financial Advisers Act.
"It may be if the FMA wants to achieve that perfectly valid policy aim there may need to be some regulations enacted."
He said the note showed that there could be risks for those providing an information-only service read from a script, because even the slightest deviation could push them over the boundary into advice.
Registered Financial Advisers would also have to be careful when advising on KiwiSaver transfers, he said.
"If you're looking to transfer from scheme A to scheme B and you talk about scheme B and you're saying ‘this looks like a good scheme' in the knowledge the old scheme is part of the client's portfolio... there's going to be a situation where unless you're very careful you're going to be giving personalised advice."
Niko Kloeten can be contacted at niko@goodreturns.co.nz
| « IFA calls for controversial rule to be scrapped | 'It's cheaper' a dangerous phrase for advisers » |
Special Offers
Comments from our readers
The new regulations make absolute sense for the industry and the undoubted need to rid ourselves of the cowboys, but this is an action too far. Many Kiwis want to be in it for the freebies, and whilst I accept that we owe a duty of care to these people, let's face it, getting them in is important, and reviewing their plans on a regular basis as part of a comprehensive retirement plan is where we should be going. Not prying too much at the outset leaves people feeling a level of trust, rather than being pushed into something they are not ready for.
The FMA is in danger of dissuading advisers from this business because it pays so little for the effort required. No doubt there will be those who say that is bunkum, but I would rather get someone started in KiwiSaver and on that savings track, than lose them because I insisted on a comprehensive plan for their retirement, or a full blown intrusive fact find, which many are reluctant to provide.
I don't disagree with the way KiwiSaver has been legislated, with low setup costs, charges and lack of penalties, I do disagree with the hammer to crack a nut approach in it's monitoring by the FMA. They would be far better off concentrating on the AML/CFT legislation and incorporating the car dealers, boat builders and real estate agents who are allowing $MMMMs to be laundered in this country.
Sign In to add your comment
|
|
Printable version |
|
Email to a friend |
A written warning that you are not taking the clients personal circumstances in account will not in itself establish a class only service. It is the clients reasonable expectation of the service provided that will carry significant weight. Don’t ever respond when the client asks “what do you think”. Don’t ever suggest the percentage of salary they should contribute to their KS. Lastly what will the client say when they are giving evidence in regard to a complaint they have about you the class only service adviser be it AFA, Accountant, Solicitor or Fire & General Insurance broker.
If you are comfortable managing the above risks please enjoy driving your new Camry, you paid for from your KS trail commissions.