RFA irked by CPD ‘scaremongering’

Mr Rule, the rules state (I couldn't help it.) The Financial Adviser Act states that all Financial Advisers must exercise care diligence and skill. AFAs have this defined in the code which includes CPD requirements. As you quite rightly state there are no such requirements for RFAs.
So in the event something goes wrong how would the regulator, or the courts, define if an RFA had the skill and showed due diligence when giving the advice in question?
They would probably ask some industry expert to tell them what a reasonable adviser would/should/could have done. This would then probably be defined by industry practices such as the ones provided by PAA or IFA or NZFAA.
These would include some form of ongoing development or training in the areas or products they give advice in. Therefore one could draw the conclusion that a financial adviser who gives any personalised advice should plan and complete some form of professional development and record it.

Bazza.

Yes. The Financial Advisers Act states all advisers must exercise care, diligence and skill when dealing with their clients. Common sense though for 99% of us in the industry I would have thought? If you don’t act in a professional manner then clients are unlikely to want to deal with you in the first place or recommend you to their friends for that matter.

How would an RFA demonstrate his/her care, skill and diligence to a regulator should the need arise? Simple - having a compliant client relationship management system (e.g. Allied Kiwi’s MYCRM) which enables all parties to see the correspondence had between the adviser and their client. Diary notes are an adviser’s best friend (as any ex banker knows) but of course it all depends on how “religious” the adviser is at keeping them. I would much rather put my faith in my own daily professionalism showing I had demonstrated due care, skill and diligence via diary notes etc. than “hope” my attendance at a CPD course would be enough to carry favour with the regulators/courts.

Am not sure about others but I find the banks/insurers do a very good job nowadays at keeping us all informed about their new policy changes/products etc. In terms of professional development then it’s again a case of the adviser keeping up with the play themselves. Sink or swim. Clients are very quick to smell who is and isn’t knowledgeable on their supposed area of expertise.

Finally I’ll say this. AFAs are held to account to a different standard than which RFAs are and for a very good reason. AFAs can give investment advice. RFAs are focused soley on mortgage and insurance advice only. The Financial Advisers Act is written accordingly and RFAs who are operating within the Act as it is currently need to stop worrying about what training groups etc. are saying. These groups are running their own business and have their own agenda!

Bazza your comments assume that there is some CPD out there that is actually worth doing, ie that will improve my service to clients. I challenge any of the CPD providers to email me some details. brent@cpam.co.nz

There's nothing to say here following your comment Bazza. You've summed it up perfectly.

Any finance related university course that you haven't done yet will supply CPD Brent. Also, sometimes it is good to refresh what you have already done, to ensure not too much hubris enters your practice.

Yes hubris is something to be wary of but...I really haven't been able to find any CPD worth doing in fact most of what I've seen seems to advocate esoteric, expensive strategies that if adopted would make portfolios less efficient.
Someone sent me some stuff today and it was a combination of old news, esoteric strategies and just plain stupidity.

Some interesting comments here - unfortunately, on several different subjects!

1: Simon Rule expresses the view that some organisations that generate revenue from providing CPD have been overstating the requirements of the act, as it applies to RFAs. I agree with him. Clearly some of these organisations made significant investments in course material, etc, in the expectation that perhaps 10,000 advisers would need to pay for more education. Sadly for them, reason prevailed, and RFAs are not subject to the education requirements imposed on AFAs, for good and sound reasons, and these organisations are trying to generate revenue however they can.

Bazza makes some good points but then suggests that if something goes wrong with an RFA's actions, the regulator or the courts will look to industry practices - possibly those promoted by one of the organisations. The regulator might, but the courts can only look to the legislation and any applicable common law. CPD will be utterly irrelevant in that situation!

Brent Sheather then makes a very valid point - but one away from the original gist of Simon's original point. As far as it applies to life risk advisers, when the adviser knows and understands the financial implications of a death or serious illness or injury on an individual, family or business, what more is there to learn that is not provided by the insurers?

Peoples needs haven't changed - there is still the fundamental need to replace lost income! Everything else is only a subset of this fundamental! Income generated by a deceased is lost. Income generated by a person off work due to illness or injury is lost! Life risk insurances exist to replace lost income.

We use lump sum policies to repay debt, etc, but, when you really look at the issues, that means that the income needed to repay the debt is no longer needed! Nothing has changed in the needs area in the 44 years that I have been an adviser.

What has changed is the products offered by the insurers! They do a pretty good job of training advisers in the strengths of their products and how they apply to the needs of people.

Don't get me wrong - clearly life risk advisers need to be educated, trained so that they know and understand these needs, but, once they have proved their competence, stop trying to force them into CPD that won't add any value.

Clearly the situation is different with medical professionals where research and development means that the sum of knowledge about illnesses and injuries increases, so CPD is reasonable and necessary. Similarly with legal and accounting professionals, where law changes have a serious impact on their advice to clients. But to imply that a competent life risk adviser needs CPD to learn what they already know is absurd.

When the CPD providers can provide something that will add value to my practice, I'll be the first in line, but, it's been some time since I experienced any real value, so I've been absent. From reading Brent's comments on this thread and others, I sense a similar view.

Then Stan suggests than "any finance related university course ... will supply CPD". But why, if it will not add value? Pursuing some study for the sake of it seems absurd.

I had to wiki "hubris", and taking the modern usage, I don't think that there is any arrogance in an experienced, competent adviser questioning the quality of CPD offered, and declining to contribute to the coffers of the CPD providers where there is no value for him/her!

Hi Simon

I agree that good processes/documentation/records of discussions will provide evidence of the advice. That doesn't mean that the adviser had the skill or knowledge to deliver suitable advice. And a 'system' may provide a vehicle for a compliant process, but it can still be used in a non-compliant manner by adviser. Luckily for Allied Kiwi advisers if they have completed all the relevant training that Allied Kiwi and the banks provide there is a good chance they have completed more the 20 hours of CPD training. Please note though that RFA advisers can and do offer advice in areas outside insurance and mortgages, they venture into property, estate planning, cash management, budgeting all of which can have a devastating affect if the advice is flawed.

Brent
CPD is relative to the experience of the adviser,client type they work with, the level of advice they give, the services and the products they provide. So CPD is not one size fits all and the onus is on the individual to figure out what they need and where they can get it. There are perfectly good CPD events/course/conferences run in NZ for most advisers whom provide personalised financial advice. Though there are some advisers who like Jedi reach a level where they must fly to another planet to learn from Yoda. Some though just stay home and complain that Yoda won't come to them or that they probably know everything anyway so what could Yoda teach them.

I do not see any courses for CPD points specific to mortgage broking/advisor only - with the majority of RFA's doing both mortgage and insurance advising it seems that the risk area of client complaint would be about 95%-5% weighted on insurance advice/non-disclosure etc.

I wonder how many RFA's are disclosing that a lender does not compulsory require insurance cover (other than for the dwelling) and that they are being remunerated in commission on BOTH the mortgage and insurance.

Davo – ALL RFAs are required to have their clients sign a "terms of engagement" document. This document explains how advisers get remunerated when they help their clients secure a mortgage or arrange life cover etc.

RFAs are also required to list the banks/insurers that they can deal with.

As for your comments that RFAs might be saying cover is required by the banks when it is not compulsory it would be a very foolhardy adviser that played that game. Why on earth would an RFA (or AFA for that matter) even think to be that stupid to put their business at risk?

There are plenty of clients who want and recognise the “need” to have cover of their own free will when they take on a mortgage. In my experience it’s usually the overzealous personal banker or mobile lender from the local bank branch that will try and sneak in “compulsory life cover” on a new loan approval!

Simon
You seem to be quoting from a different 'rule book' than the one I have been operating under.
I stand to be corrected but RFA's are not required to have client's sign a "terms of engagement" document Or explain how they get remunerated OR list the insurers they place business with.

Any mention of any of the above details in their Disclosure Statement is disallowed and their Disclosure Statement would not be in the prescribed form as set out in the Regulations pertaining to RFA's.

However, it is good practice to have clients sign a Terms of Engagement/Scope of Service document which could include remuneration details and product providers but it is not mandatory.

(The views expressed above are my own personal views).

Hi Ron,

Allied Kiwi (who I am with) have been advising members (the vast majority of whom are RFAs) that we are all supposed to be completing a Disclosure Statement AND Terms of engagement document with our clients now. How we get paid and which providers we can deal with is covered off in the terms of engagement.

If as you say this is not in fact mandatory for RFAs under the Act I would still follow this process anyway (as I am sure others would) as I think its "common sense" and demonstrates you are a professional showing a level of care with your clients and their rights as a consumer with you acting for them. Prior to regulation coming in to force I was doing something similar already (albeit not as detailed) and I am sure most long term mortgage brokers would have been the same also.

Not sure why any RFA would have an issue completing a terms of engagement document with their clients? Its a logical extension to what we do everyday when meeting clients.

@Graeme Lindsay, I think wikipedia will dish out some CPD for your research effort (unstructured)

Simon

I totally agree with you that it is a common sense approach to operate in the way you do. I was just making the point that it is voluntary and not mandatory.

Talk about disparity of advice! If we can't get the knowledge base right, how can we be expected to give industry consistent (and relevant) advice?

The answer is simple. Seek whatever knowledge you can that is or may be relevant to the advice you are giving. Then record it - that is all you need to do to show that the advice you are giving is based on sound recognized standards and practices.

The basic problem with the RFA caregory is that is covers a very wide range of finanical service people, from bank staff who offer simple company products, to personal insurance advisers. Most of these RFA's only have modest and need simple CPD requirements, which are covered by their employers.

The real issue is that an RFA who sets themselves up as a provider of advice on personal risk is actually offering a service which is as complex as that offered by a provider of pure investment advice. They will have coresponding CPD needs. Note that CPD needs to cover office procedure, client service, client records, law changes, tax changes etc etc, so there is amble scope for courses.

If you are a member of a professional association, then the periodic talks and the annual conference will easily cover CPD needs. If you are forced to attend adverted courses disguised as CPD then you need to rethink your professional association.

Mike, the basic problem with RFA is that it has subverted the title 'Adviser'. It is the same thing but with an RF in front, and means about as much.

The real issue is that RFA is nothing more than a new piece of jargon, and has become a dual-purpose term used instead of 'adviser' and for 'non-AFAs'. To the public it means nothing. To govt it is just an acronym, and in any public communication, letterhead and on business cards it is illegal to use "RFA" like it's some sort of title - cos it's not.

As to CPD I agree that risk insurance can be as complicated as investment stuff, so I therefore completely disagree that my annual CPD requirements are met by a conference or lunch with the IFA. I am RFA focused on risk. Ron says people's needs may not have changed much, but the products are constantly changing. Product launches, seminars and workshops help, some structured and some not, and ongoing Massey papers for the Grad. Dip Bus stds all go into my CPD plan. Most of the better risk advisers are operating this way –clocking up useful CPD. As the bar gets moved higher it is those who don't keep learning and growing through CPD that will be left behind.

I am not in a big chain, or network, or group who feed off me (CPD is just one example of their self-interest) and really the Stategi and others' marketing is just that - advertising. Seems Mr Rule just needs a pinch of salt.

Good on you Simon for speaking up. I'm sick of regulation and people with vested interests promoting their own businesses off the back of it. I think it's all about controlling advisers, scaremongering and stroking ego's. Let us get on with it I say...

Hey Broker, how long have you been around? Regulation in only the latest chapter in the self-interest story. For decades various people, groups and corporates have fed off advisers hard work, pushing their own agendas, attempting to control us while stoking their own egos.

Since it's nothing new, I refer to my earlier comment about salt.

Hi Dirty Harry. Further to Broker's comment above (thanks Broker) yes I agree with you that there has always been self interest in our industry. No doubt this will always be the case! The difference however this time round is that there is now an awful lot of actual money changing hands with no appreciable benefit to A) the consumer themselves or B) advisers own businesses.

Another reader commenting on an earlier article summed things up better than I can:

“Assessing Regulation to date, on a scale of 1 to 10, I would score a 1 for benefit to the consumer, but a 9 for benefit to the regulators themselves, lawyers, printing firms, training organisations and various other parasitic groups all wanting an easy feed off the back of the energetic adviser”.

Truer words were never spoken.

Been in the industry 12 years. Glad you approve of my comments, many won't. I personally enjoy what I do and intend to continue doing so. I'd like to see some of these people do some real work - see if they survive as an adviser on commission for longer than five minutes...!