FMA confirms RFAs can sell KiwiSaver
The Financial Markets Authority (FMA) has released its final guidance on the sale and distribution of KiwiSaver, confirming the circumstances in which registered financial advisers (RFAs) can continue to sell the scheme.
Tuesday, October 16th 2012, 6:10AM 
13 Comments
Sue Brown, the FMA head of primary regulatory operations, acknowledged there had been concern within the financial services industry about the extent to which KiwiSaver services could be provided by advisers who were not authorised or part of a Qualifying Financial Entity (QFE).
“FMA’s position is that there are limited circumstances in which a person selling a particular KiwiSaver scheme to a client will not be considered to have provided an advice service,” she said.
“There is broader scope to provide class advice, given the incentives available to join KiwiSaver and the investment options available within KiwiSaver schemes.”
The FMA guidance note outlines what it deems class advice, personalised advice and no-advice, and who can offer each.
The guidance described class advice as generic to a group the investor belongs to, though not tailored to their specific circumstances, and says it may be provided by RFAs.
The move to allow RFAs to give limited KiwiSaver advice had been backed by both the Institute of Financial Advisers (IFA) and the Professional Advisers Association (PAA), both of which made submissions to the FMA on the draft guidance note.
“Perhaps the best outcome is that the document makes it clear that RFAs can sell KiwiSaver in tightly controlled circumstances, by setting the framework for RFAs in particular to continue to sell KiwiSaver with confidence,” said the IFA.
Brown said she expected KiwiSaver providers “to consider the implications of this guidance note and make appropriate changes as soon as possible.”
“We expect these to be in place by March 1, 2013.”
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Comments from our readers
On 16 October 2012 at 8:08 am Fred said:
An eminently sensible decision. KiwiSaver schemes are comprehensively regulated, RFAs are very capable of, and best positioned to provide service, while savers need affordable help. On 16 October 2012 at 8:28 am Smith Wesson said:
Ummm....what a joke.Is there any reason at all to be an AFA?
Seems everyone can supply class advice to anyone and circumvent the nonsense compliance.
On 16 October 2012 at 9:03 am when will it all end said:
Well I am pleasantly surprised, but also confused by the latest FMA guidance note on KiwiSaver.
We have had months of being told that our risk profiling has to be modernised, we need to ask more questions of clients even to the extent of psychometric profiling. Now on page 4 para 7 of the Guidance Notes we are told, " We consider class advice may be provided where a small number of questions are answered by the client to ascertain risk profile...........". So the most important financial decision that most people will ever make, certainly the 20 to 30 year olds, other than house purchase, is now reduced to insignificance. Whilst I welcome the clarification, should the FMA not have sorted this out initially rather than come in with the heavy stick and backtrack. So now we have a situation where from assessing a risk profile, attitude to risk, capacity for risk, we come down to a few questions. The lunatics are running the asylum.
On 16 October 2012 at 10:05 am Andrew said:
As an AFA douche-bag I find this abhorrent. Professionalism blah blah blah protection of blah blah blah. On 16 October 2012 at 10:58 am billy the broker said:
Does the left hand know what the right hand is doing WTF!! On 16 October 2012 at 11:53 am Dirty Harry said:
hold your horses. Let's see what the "guidance" looks like in March.
Under the current rules, regs, notes, and various white papers, articles and contributions from the many, I, as an RFA am still working towards AFA, slowly. And I am avoiding KS advice of any sort.
It's too hard to show, conclusively that one hasn't crossed the line into "personalized". It doesn't help that the bloody line is crooked, blurry and keeps being shifted.
My career isn't worth the massive risk for such a poorly paid product, and I dont see that changing in March either.
On 16 October 2012 at 12:20 pm Ron Flood said:
Whilst the FMA needs to be applauded for at least giving guidelines and their view on what is and isn't 'personal advice' regarding Kiwi Saver, I caution all RFAs to think long and hard before exposing themselves in this area.
Having obtained all the credentials to becoming Authorised (only require Standard Set B to complete the process)I made the decision to stay away from KiwiSaver and remain Registered only.
I would suggest that unless you are able to place application forms and a prospectus from several providers at the same time with your client's it is going to be very hard to prove that you didn't give a "recommendation" and therefore "personal advice" to your client.
From my personal experience, one of the most common activities at present is advisers changing client's KiwiSaver provider to obtain the client.
I believe that we will eventually follow some of the overseas models whereby trail commissions will be banned. Once this happens, the incentive to change a clients provider will move from the adviser to the fund managers. This will suit the Banks as they who have a steady stream of prospective clients walking through their doors every day.
One thing I do ask of the Banks is to stop their front line staff advising client's that one of the advantages they offer is the ability to check their KiwiSaver accounts online on a daily basis.
For a 30 yr old there are 12,784 days until they reach 65 (including leap years). What advantage is there in looking at your balance this many times as opposed to receiving regular investment statements.
Disclaimer; These are my personal views and not to be taken as those of any organisation or group I am associated with.
On 16 October 2012 at 2:46 pm Amused said:
“FMA’s position is that there are limited circumstances in which a person selling a particular KiwiSaver scheme to a client will not be considered to have provided an advice service,” Sue Brown said.
Translation - we at the FMA expected to have thousands more AFAs available to sell KiwiSaver than we actually do today. Whoops… We really thought that mortgage and insurance advisers would happily want to jeopardise their core businesses of many years with new non-relevant qualifications and on-going “mind numbing” compliance requirements (by becoming an AFA) just to have the opportunity to sell KiwiSaver which is a very poorly paid product by comparison. Consequently we at the FMA have been forced to backtrack or else regulation of the financial services industry will actually end up limiting the public’s access to their ability to save for their retirement. This would not have been a particularly good look and would have also begged the question whom the Financial Advisers Act is actually benefiting? The regulators and various “pop-up” training and compliance organisations themselves or the consumer who the Act was supposedly written for in the first place?
On 16 October 2012 at 2:54 pm Steve said:
RFAs will have to get moving with an AML programme pretty quickly then. On 16 October 2012 at 7:34 pm traveller said:
It seems to me a case of the FMA making policy on the hoof as the situation continues to change and they try to learn what they are doing. On 17 October 2012 at 10:21 pm James said:
Well it's only people's retirement incomes, it's not like it's anything important or anything. On 18 October 2012 at 8:53 am MPT Heretic said:
So the FMA and IFA believes enabling a product flog without personalised is a good idea. Can anyone tell me how that is in the clients best interests. What happens in a day, a week or a year when there is an issue or question related to their personal situation and they are unable to talk to their 'adviser'.
So an RFA gets paid upfront for providing class information and documents. Fair enough. However how ethical is it that someone will earn a commission in Year 2,3,4.... when they are unable to provide any further service to that client?
On 19 October 2012 at 5:12 pm 6ftndr said:
I knew it from the beginning and this just proves my initial thoughts, this whole thing is a complete shambles, the FMA must stand for 'forever mucking around' Sign In to add your comment
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