FMA tells advisers how to give limited advice

The FMA has released a guidance note to help authorised financial advisers give limited advice, such as on KiwiSaver only or one investment product.

Monday, July 29th 2013, 7:20AM

In the note FMA acknowledges one of the issues raised by advisers is there perceived inability to give simplified advice to to lower value clients without the full compliance burden and fee scale of a full personalized advice or investment planning.

“Advisers are often unclear about the paperwork and compliance requirements for simplified advice,” the FMA says.

It says advisers translate the requirements of the Financial Advisers Act and code into an “unhelpful level of additional paperwork to cover all bases.”

“This adds to the costs of providing advice services and clients often have no interest in reading it.”

The FMA says all advice is “limited to some extent”, but when it talks about limited advice it this context it means advice that is limited to a particular matter and is therefore less comprehensive.

“it is important to note that limited personalised financial advice does not equate to a lesser quality of advice for clients.”

FMA says an AFA can provide limited advice using the following criteria:

Use your training and judgment to decide whether, by limiting the scope of advice, you can still meet your legal obligations as an AFA.
Adjust the level of your enquiries to reflect the nature of the advice being provided
Implement systems that will help you decide whether limited personalised advice can be provided to a client in a way that meets your legal obligations
Communicate clearly to the client that the type of advice service you are offering and what is and is not being provided.

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