AFAs unhappy with regulation
Authorised Financial Advisers are dissatisfied with the regulatory regime and think it has done little to improve confidence in advisers, a new report by the Financial Markets Authority shows.
Tuesday, December 18th 2012, 6:15PM 
16 Comments
by Niko Kloeten
The report was compiled from an anonymous online survey conducted in September that was completed by more than 900 of the roughly 2000 AFAs nationwide.
It found only a third of AFAs (35%) thought public confidence in the professionalism and integrity of financial advisers had improved over the past 12 months, while more than half (57%) thought confidence hadn’t changed and 7% believed it had reduced.
Recent court cases and FMA activity against “bad eggs”, along with greater awareness of the need for financial advisers to be qualified, were cited as reasons for public confidence increasing.
Those who thought confidence hadn’t increased felt the publicity about prosecutions against the “bad eggs” hadn’t been counterbalanced by coverage of the good work of most advisers.
The survey also found 61% of AFAs had made fundamental changes to their service offering as a result of the regulations, the most common change (43%) being that they no longer target a broad base of clients but instead focus on a specific niche.
One adviser said his customer base had been segmented due to the increased compliance costs: “Lower value clients have a more cost effective offering with less direct access to a named advisor - they deal with a phone based advisor team.”
The FMA said it would be “concerned if AFAs respond to regulations and new professional obligations by effectively limiting access to personalised advice.”
It said it would look at whether changes to regulations had driven changes to remuneration practices, such as whether AFAs had successfully switched to fee for service models; the survey showed commission is still the main remuneration method for AFAs.
Overall AFAs were happy with the Code, although uncertainty about some aspects had led to an increase in paperwork to “cover all the bases”.
However, they weren’t happy with the disclosure regime and questioned its usefulness to clients and the necessity of the two-staged disclosure; there was also the perception of an uneven playing field with the “lighter” registered financial adviser (RFA) disclosures.
There was general unhappiness with the tiered regime – many AFAs think RFAs ‘get off too lightly’, are not well qualified and are subject to a disproportionately lighter regime in some cases, for providing advice on the same products and are therefore a major risk to investors.
Niko Kloeten can be contacted at niko@goodreturns.co.nz
| « Fate of exempted AFAs undecided | Separate adviser authorisation opposed » |
Special Offers
Comments from our readers
On 19 December 2012 at 9:45 am Brian Klee said:
It is incorrect to presume that all RFAs are "not well qualified" and are practicing under a "lighter regime". Some are highly qualified offering Category 2 products and fully embrace those standards required by AFAs. They just elected to avoid the higher charges. On 19 December 2012 at 12:40 pm Amused said:
Well said Brian. On 19 December 2012 at 2:12 pm Dirty Harry said:
But it is correct to say that the RFA regime, esp in terms of disclosure is lighter.
Because it is. It's one of the biggest disappointments of the whole thing.
Furthermore: The FMA said it would be “concerned if AFAs respond to regulations and new professional obligations by effectively limiting access to personalised advice.”
Well dur. That was a well signalled and inevitable consequence. But don't dare blame advisers for that.
On 19 December 2012 at 3:34 pm Amused said:
@ Dirty Harry
The biggest disappointment with regulation is actually that it hasn't stopped advisers operating unethically. It has just been a money grabbing exercise so far from adviser’s pockets. Look at the David Ross example if you want proof that Regulation has not worked. Remember Ross was supposedly a "well qualified" and "Professional" AFA according to the FMA.
So RFAs have a lighter disclosure regime than AFAs - Whoopie Doo! As Brian said above most RFAs are already disclosing to their clients along the lines of what AFAs do and remember we are only giving our clients mortgage and insurance advice NOT investment.
I'm really tired of people slagging off RFAs as been "less professional" or having it easy in terms of disclosure. Last time I checked it was AFAs who were grabbing all the news headlines and for all the wrong reasons!
Agree 100 percent with your comment about access to personalised advice and the FMA wanting to try and blame advisers.
On 19 December 2012 at 4:02 pm w k said:
Typical of regulators, they can do no wrong. Advisers must do exams to be qualified, pay a bunch of fees, follow rules, keep records, prepared to be audited, etc, before they are allowed to do their job.
My gut feel, they won't hire ex-advisers (I stand corrected), that's why all these hiccups.
And regulators? don't have to understand the business, no experience required (need only to know nuts) and get paid good salaries to be able to tell advisers what to do and audit them. When things go wrong (and it has been since day one) ..... ummmm ... let me see which advisers are at fault.
On 19 December 2012 at 4:50 pm Broker said:
RFA's = insurance & mortgage advice
AFA's = investment advice
Who's in the bulk of the headlines? - AFA's. End of story.
On 19 December 2012 at 5:50 pm Dirty Harry said:
My point is anyone who is worth their salt would be unhappy that a bankrupt or other shady sort can be RFA or join a QFE and not have to disclose that. It's about perceptions. Good RFAs should not like it that the types who can't be AFA, or are not suitable/capable of running high levels of integrity can easily be RFA.
Personally I wouldn't hold Ross as an example of all that is wrong with regulation, because he and his (rare) type will always find a way through. Much of his offending pre-dates the regulation anyway. It's the convicted Aussies who came over and got RFA. It's the ex finco "planner" types and the scumbags and shysters who nowadays are choosing to sell insurance and/or mortgages with the easier entry, lower cost, reduced disclosure RFA and QFE options that worry me the most.
Why are they still in the game? Why is it so easy? They are a ticking bomb, and like Ross, they will do a whole lot of damage to us because until they try a few out the poor punter has nothing to compare a good RFA from dodgy one.
On 19 December 2012 at 9:20 pm bill said:
Sorry broker, my complaints provider tells me 99% of complaints come from your sector. But yes what a joke. All these regs, we jump through hoops and costs to get become an AFA and prove what?
RAM does it again. Either the FMA should be ashamed that they didn't stop him or alternatively we all agree that all the regs in the world are useless and bad apples can't be eliminated, e.g. the law society have had all sorts of rules for years, but the odd bad apple surfaces all too often.
All the rules and bureaucrats don't seem to be able to eliminate them. I did see one lawyers sign outside his office - a bad apple - in Ponsonby - his sign said criminal lawyer - some wag had painted out the word lawyer - classic !!
In the end, we have to, as individual advisers, somehow show our clients that we have integrity and a personal value system of some worth.
All the AFA designations and rules and audits in the world probably don't mean much - it's what's with us that matters.
On 20 December 2012 at 1:39 pm Amused said:
Broker is spot on with his comment.
@ bill - Great story about the lawyer - made my day!
Merry Christmas all.
On 24 December 2012 at 12:59 pm Mark Jory said:
I would just like to see the FMA follow thorugh on its promise that it would promote the AFA designation to the public.
That way the public would have a better understanding that AFA's have taken the time and the expense to gain some qualifications, and that RFA's have not!
On 16 January 2013 at 1:48 pm Miles said:
I am a bit late in responding, so this may not be noticed but....
I take the view that the name AFA or RFA is quite wrong. It is a case of the departmental tail wagging the business dog. The bureaucrats want to pigeon hole people for their own purposes. I suggest ignore AFA and RFA except where legally required. Otherwise continue to call yourselves Investment Advisers, Mortgage Brokers, and Insurance Brokers. The public expect regulation as a minimum requirement. The industry needs to show the public that the usual traditional names mean something worth while. To deal with RAMs, there should be much more suspicion and much more potting competitors who are questionable. RAM should have been discovered first by the industry not the RMA. Complaints should have been filed with IFA if he was a member. Lawyers are required to report suspicions. Investment advisers should do likewise to protect their industry integrity.
On 16 January 2013 at 1:55 pm Miles said:
On reflection, I would go further. I think IFA should contact NZLS and NZICA to enter agreements that all three organisations should have a positive onus on members to report suspicious activity of all members of all three organisations such as the Ross Asset Management situation. Why should we waste taxpayer money when members can do better? On 17 January 2013 at 10:09 am btw said:
Miles, you forget or didn't know - the govt did originally propose that the industry would self-report. The industry kicked up such a stink they were forced to withdraw it. On 23 January 2013 at 8:14 pm Tony Vidler said:
This thread has been interesting to watch and read, but can I just ask how it has evolved that the IFA needs to do something here?
I ask from the perspective of a typical IFA member of course....there are some 1,000 of us that voluntarily have adopted higher than required disclosure standards and behavioural guidelines for many many years. And we pay to do so.
And we hold ourselves accountable to a judicially independent complaints process that can judge our behaviour - and we have done for years. We pay for that too.
And by the way, we pay all the other costs and do all the other things to be allowed to practice that non-IFA advisers do too - including other disputes schemes.
And somehow there is this prevailing belief in areas of the industry that these 1,000 or so committed career professionals are responsible for representing and policing other advisers who are not IFA members.
How does that work?
I just don't get it.
Tony Vidler
On 24 January 2013 at 1:00 pm Jon said:
Tony, the IFA represent only a small group of people involved in the profession. The rest of us have been doing the above and if someone locally is not towing the line we have no problems having him or her investigated. We don't need to hide behind some 3 letter acronym to maintain professionalism at a standard higher than the legislation. It is called "self discipline". Thank is how it works. Community responsibility. On 24 January 2013 at 4:02 pm Tony Vidler said:
Interesting reply thanks Jon.
May I call you Jon, that isn't an acronym is it?
You are quite correct that the IFA membership is a minor proportion of adviser numbers - perhaps one-eighth, perhaps a bit more - nobody is entirely sure about that to be honest (including those in charge of keeping the public register of who is out there it seems).
I shall largely leave aside the points about hiding, especially in this forum, other than to say many of the highest profile people in the industry for over a decade have been IFA members. They don't tend to hide behind anything as a rule.
I also agree entirely (and have attempted to make the point repeatedly for years) that professionalism, and any individual's ability to be labelled a professional, is not contingent upon acronyms or even qualifications necessarily. It is primarily about behaviour, ethics and commitment to professional improvement.
The question that I asked was a reasonable one, but I will re-phrase:
How does it work in people's minds that approximately one-eighth of the adviser population that is not prone to hiding are expected to effectively lobby for, or crusade, or provide some sort of oversight function, for the seven-eighth's who are not members?
I simply do not understand that line of thinking, and would be interested in understanding how it comes about?
Sign In to add your comment
|
|
Printable version |
|
Email to a friend |
