PAA and IFA disagree on proposed Code changes
The industry’s main bodies are at odds over some of the suggested changes to the Code of Professional Conduct for Financial Advisers.
Monday, September 9th 2013, 6:00AM 
22 Comments
The two key areas of difference for the asssociation revolve around developing a pathway for RFAs to give advice on KiwiSaver and changes to CPD requirements.
The IFA’s submission said it did not agree with a proposal to allow a KiwiSaver pathway that would mean registered financial advisers could start to give personalised advice on the savings scheme.
The IFA submission says no changes should be made to the requirement that only AFAs give investment advice and the principle behind the proposal to change that could not be justified.
“The core competencies for financial advisers should not be reduced below what is the current minimum standard. There is a fundamental level of knowledge of financial advice required for advisers to be competent to give financial advice. To narrow down the scope of that knowledge is likely to result in a lowering of the minimum standard for financial advice.”
PAA general manager Jenny Campbell said she had encountered that attitude at her own organisation’s roadshows but it was a disappointing one. “Are they trying to protect their own patch rather than upskill the industry as a whole? It seems to be a sensible, common sense solution.”
She said fears that investment advice would be “dumbed down” were misplaced.
But when it came to the proposal to change continuing professional development (CPD) requirements, the IFA backed the move and the PAA did not.
Campbell said the suggestion that advisers be required to complete 30 structured CPD hours over two years, rather than 10 structured and 10 unstructured per year was a sensible one. But she said she was concerned by the idea of a blanket ban on product providers being able to offer CPD.
She said they could not offer structured training without it being authorised by a professional body, DAO or TEO. “These organisations are fully equipped to differentiate between an hour’s sales pitch and an hour of technical training.”
She said CPD was already hard to access and there would be no point in making it harder. “The code committee is focusing on investment advisers without thinking about mortgage and risk advisers. Technical training is important for risk advisers because all insurance policies are not equal and they need to know about the differences in policy wording.”
But the IFA said it agreed with the move. “It confirms providers as independent third parties and reinforces the point that CPD must be separate from product.”
IFA chief executive Penny Mudford said IFA advisers were already required to do a minimum 60 hours’ CPD over two years, of which 30 hours had to be structured. “We’ve got well-established CPD requirements… the new CPD definition gives better clarity around what structured CPD is. At a high level, we’re generally accepting of the changes.”
Submissions on the proposed changes closed on Friday.
| « [Weekly Wrap] Boosting positive profile | IFA working on pro-bono offering » |
Special Offers
Comments from our readers
On 9 September 2013 at 11:32 am Craig Simpson said:
To say structured CPD credits is already hard to access is absolute rubbish.
If you are prepared to pay you can access CPD structured credits easily enough.
Look at institutions like Strategi who provide everything you need to maintain the structured requirements.
All you have to do is the unstructured part and that is pretty easy to attain too and with very little cost.
On 9 September 2013 at 2:07 pm Ally said:
This confirms the suspicions of many that when it comes to CPD the Code Committee is buying the IFA propaganda hook, line and sinker ........
On 9 September 2013 at 2:30 pm brent sheather said:
like I have said before the code committee needs to be refreshed and the sooner the fma gets on top it the better. On 9 September 2013 at 4:57 pm Graeme Tee said:
Good point, let's look at what Strategi offer, i quote from their latest newsletter: • Overcome the fear of success.
• Identify 3 tools you can use to grow your business in the 55-plus age group.
• Take advantage of the single largest opportunity presenting itself to financial planners.
Now this is exactly what is wrong with current CPD. Strategi is a accredited as being able to "tell the difference between a sales pitch and technical training" according to the IFA but this looks like sales pitch training and nothing to do Continuig Professional Development. This does nothing to raise the level of professionism and is endorsed by the IFA? That the Code Comittee even consider advisor associations as CPD providers shows yet another example of industry capture.
On 9 September 2013 at 5:06 pm Ally said:
Yes, the Code Committee had the wool pulled over their eyes by the Accountants Society (giving them exemptions which allowed David Ross to slip in via the back door) and now it seems they are going to fall for the IFA game plan as well; that plan being to become to primary accredited supplier of CPD sop that all AFAs are forced to join their organisation. On 9 September 2013 at 10:44 pm John Milner said:
I tried to question the PAA's rationale for pushing the KiwiSaver pathway at last weeks PAA's Auckland roadshow. I was shut down by the chairman Bruce Cortesi who obviously didn't want to hear the views of members unless it suited him.
He advised that if clients needed full financial planning advice at retirement, then they could see a planner at that point but in the meantime the KiwiSaver pathway would suffice.
Isn't that all a bit too late? It appears the blind are leading the blind at the PAA and will continue to be seen as the "poor cousin" as organisations go with that attitude. If you want to advise on KiwiSaver, earn your stripes and make the very small effort currently required to fully understand the big picture for your clients.
Brent, I couldn't agree more with you. Unfortunately, Active Managers have deep pockets.
On 10 September 2013 at 10:09 am w k said:
Product knowledge and the dos and don'ts can be taught. But when it come to real practice, the ethics and professionalism part of it, does anyone think any amount of code can stop a crook? Keep trying. I still stand by the suggestion of individual licensing for ALL advisors, renewable every 2 years, recommended by at least 2 practicing advisors and a BDM at each renewal. On 10 September 2013 at 11:20 am Amused said:
Agree with other reader’s comments above. Associations like the IFA know that without them been able to offer structured CPD to members (especially AFAs) many advisers would likely question the continued relevance of belonging to a professional body in the first place.
In a regulated environment where all advisers must belong to a separate dispute resolution provider associations like the IFA and PAA are really struggling now to demonstrate just what it is that they do for advisers and our businesses (particularly those advisers who are established in the industry) Consequently CPD is something associations are all very keen to safeguard.
On 10 September 2013 at 2:02 pm billy the broker said:
Sorry to say wouldn't touch this lot in their Ivory towers....too many egos..which is a shame..as we all should get along!! Some people just over embrace their sense of importance...remember you are an insurance agent..nothing more..we protect people..get that in to your thick heads.....no doubt I will bump into you somewhere along the line....!! On 10 September 2013 at 2:21 pm Bruce Cortesi said:
The meeting was a PAA Road Show, and not one of an open Forum. Members were asked to come directly to our General manager or myself at the conclusion of the meeting to voice any concerns. Some AFA and RFA Advisers did so and provided very positive feedback.
The misconception that AFA, RFA or QFE are qualifications is a concern. Clearly these are designations and not qualifications. The minimum qualification for being designated an AFA is completing Sets A,B and C of Level 5 Certificate in Financial Services PLUS the appropriate papers for your discipline in the industry such as Set D or Set E plus the insurance or mortgage Advice strands. An Adviser who has not done Set D but has done the appropriate Level 5 papers relating to say Mortgage and Risk in addition to Set A, B and C can be authorised. Therefore, AFA is not a qualification.
It is important to remember that Kiwisaver has been high on the radar since regulation. The recommendation that has been strongly advocated by the PAA to the Code Committee is that an additional Kiwisaver strand be provided in the Level 5 Certificate for the purpose of providing greater access to the NZ Public to advice on Kiwisaver. This means that an RFA can complete Set A, B and C in the Level 5 certificate PLUS the appropriate strand necessary for them to provide advice in their elected discipline and become authorised. This is clearly stated in the criteria of the Level 5 certification. The compulsory sets are A,B and C. D is not compulsory to become authorised. You can do Set E and one of the additional insurance strands or the mortgage strand. I envisage that the Kiwisaver proposal in front of the Code Committee would be one of adding a Kiwisaver Strand. It is not intended that the Kiwisaver strand replace full financial planning. Currently the public can enter into Kiwisaver with no advice through default plans with their Employee, through the bank QFE, or AFA adviser who has done the Investment Strand. Should we have more qualified Kiwisaver Advisers? Definitely.
It should not be forgotten that a child who has been registered with Kiwisaver by their parents does not generally require immediate financial planning Advice. Indeed one has to question whether a teenager or young child has the financial literacy or capacity to even understand why they would require full financial planning at such an early age. Does it not make sense therefore for that person to be provided with some advice? It does concern me that a small number of AFA’s have been quick to judge this proposal without looking at the larger picture of making advice more accessible to the public. Already the public find our industry confusing and have little understanding as to the components of regulation. We need to change this – and sooner rather than later.
We have insufficient numbers of AFA designated Advisers providing access to advice on Kiwisaver. This needs to be urgently addressed. The proposal to make Kiwisaver advice more accessible to the public by way of encouraging more RFA Advisers to move into this AFA space is a sound one. Let’s not forget either that those Advisers will have to meet all the criteria an AFA does currently. Furthermore, the extent of advice and scope of service an Adviser can provide are also determined by ones Disclosure statement.
In closing, I would also think that the FMA would be positive for any pathway that encourages greater professionalism in our industry – and one that encourages more Advisers to go down the track of becoming authorised. Being authorised is all about process. Process is the foundation to determining a proper outcome. Outcome is putting the client needs first. We need to remain focused on putting client’s needs first irrespective of your role in the industry, or we will have no industry. Therefore access to advice is critical.
On 10 September 2013 at 2:33 pm Brent Sheather said:
Good point Amused. I just had another read of “After The Panic” by Gareth Morgan. Check out pages 184-185. It lists some leading lights from the IFA including Roger Moses, Graham Stevens (past president and life members don’t you know), Muriel Dunn, Kelvin Syms, Ricky Bennett, Phillip Holland, Phillip King and Alison Renfrew. According to the book most of them specialized in Bridgecorp, MFS, Canterbury Mortgage Fund the ING disasters, Five Star etc etc. I should take some time to update the list of IFA notables with Mr Robinson being the latest addition.
The point being how on earth can the FMA can let these guys provide CPD to themselves and others. Unbelievable and what’s more two of their members are on the Code Committee. Only in NZ or maybe Zimbabwe.
Regards
Brent Sheather
On 10 September 2013 at 3:28 pm Supportive Party said:
Bruce, well put.
I hold a number of university qualifications and could push the button on the AFA designation however I prefer to leave investment to the full time investment professionals and find risk advisers tooting the AFA status to be ill informed as many seem to be convinced they are qualified investment advisers.
I think the PAA's proposal is a sensible one that says it how it is -let AFA's be INVESTMENT specialists who create full comprehensive plans and let RISK advisers be specialist risk advisers. Instead of this blurred line of AFA status just so you can do Kiwisaver which I would imagine a lot of people are.
I can understand that people may see this as dilution but come on AFA's how complicated is KiwiSaver? (probably a few comments will be made about that statement but with specific kiwisaver training - with on-going structured CPD requirements the advise given would be sound)
True AFA's should be supporting the PAA proposal
On 10 September 2013 at 4:13 pm Amused said:
Bruce – you don’t need to be an AFA to have good processes or act professionally with your clients. I’m tired of this continual push by professional associations to have every adviser in the country authorised. As the above article and reader feedback illustrates we all know why organisations like the IFA and PAA are so keen for this to happen!
P.S. Most RFAs(especially those of us who are mortgage focused)are not vaguely interested in been able to give our clients Kiwisaver advice. Hence we have no desire to move into the AFA adviser arena thank you very much.
On 11 September 2013 at 11:21 am Ally said:
Yes, the IFA seems to have the ear of the Code Committee and they won't be satisfied until they force all AFAs to come to them for CPD. But hopefully the Code Committee is not that gullible...... On 13 September 2013 at 2:37 pm Paul Carrick said:
Interesting point being made re IFA,
I didn't read that they wanted to provide ALL the CPD, as an IFA member and an AFA, a fair percentage of my CPD is not sourced via IFA, so far no issues,
As a member I also haven't felt that there is any pressure to do so.
Brent, your comments re Gareth's book and the IFA advisers , keep in mind there are many hundreds of advisers who belong to IFA and other Organisations that are honest hard working people,
On 17 September 2013 at 7:48 pm Andrew Nuttall said:
Brent, agree with much of what you write about but feel that you should be a member of the IFA if you are going to criticise.
The majority of IFA members are committed to high standards and many have given hours of service on a voluntary basis to raise knowledge and standards for the benefit of New Zealanders.
You seem to have much to contribute so please consider joining the IFA and get involved with the local committee so you too can make a greater contribution to your community.
Would you also consider offering your input to the educational roadshows run by the IFA?
On 19 September 2013 at 12:33 pm brent sheather said:
Hi Andrew, to be honest the IFA brand is so tainted I would rather be a member of the IRA.
I also think the business models of many financial advisers are inconsistent with best practice and that is the reason the IFA's CPD is so bad and in many cases completely at variance with good advice/putting yr clients interests first.
In my view the IFA should not be allowed to offer CPD or educational roadshows until it is checked by some independent authority that knows what it's doing.
On 20 September 2013 at 8:52 am Independent Observer said:
The only industry club to belong to is called the FMA. These rest of the acccronyms compete for industry discretionary dollars, with temptations such as holiday homes, conferences, and CPDs.
I'm not convinced that attending a conference on "how to sell" (or related topics) is actually improving the experience for the clients (remember them?), and as such, have to agree with Brent's comments above: the FMA should create an independent body (or themselves) to be the sole issuer of CPD credits.
Until that time, clients will struggle to have confidence in what it is that the various industry bodies do
On 20 September 2013 at 9:45 am Bill said:
Hold on a minute Brent
What about my local sharebroker who brags that he didn't use finance companies, but he doesn't tell people he recommended junk bonds that fell over.
Then there were advisers who used property syndicates leading to big losses.
And advisers who recommended hedge funds that collapsed.
And a leading sharebroking firm who had an Icelandic fund that fell over.
You can't try to hammer advisers who failed in one sector only.
You must include them all, or none.
CPD's - portfolio construction Forum and Strategi's finology conferences will get you all the structured CPDs you need, and in my independent opinion, they are good conferences indeed
and you don't need to be an IFA member either
On 20 September 2013 at 3:44 pm Brent Sheather said:
Hi Bill, Good point. That firm with the Icelandic fund that fell over and the IFA should be barred from representing the industry on the Code Committee or the disciplinary committee because neither of them, in my view, have much idea as to what best practice looks like.
Thanks for the advice re getting CPD from those providers but my firm is already profitable and I don’t need any advice on marketing because I am not taking new clients so they don’t have much to offer me. LOL. Regards Brent
On 23 September 2013 at 10:34 am Bill said:
You don't need to be an IFA member (I'm not) to get structured CPD's
Portfolio construction Forum and Strategi's finology conferences will get you all the structured CPDs you need
And no Brett, I didn't find them to be marketing conferences , not at all, rather very well balanced and valuable info
However I also get top quality from Dimensional fund advisers conferences - probably better again - - but the usually daft situation exists, because they are Australian based they are not structured credits - but I'll keep going as they are so good
Sign In to add your comment
|
|
Printable version |
|
Email to a friend |
To have the IFA actually training people is patently ridiculous although it is becoming clear that there are some things that the IFA are good at.
Also when the IFA say that the latest move from the Code Committee “confirms providers as independent third parties and reinforces the point that CPD must be separate from product” are they being sarcastic?
There is no way that the IFA can be an independent provider … it can only sell what advisers will buy and because good advice doesn’t sell none of it will be forthcoming.
For example I am yet to see CPD focusing on minimising fees, the wisdom of incorporating a passive approach into a portfolio or the need to have high quality bonds in your bond portfolio.
These are just a few differences between best practice as evidenced by the portfolios of pension funds and bad practice as evidenced by much of the retail advisory industry.
Obviously there is no way you can recommend a low risk bond portfolio if your management and monitoring fees total 2-3% pa.
Good CPD topics but much more fun to go a sponsored one hour course on the attributes of small cap Australian tech stocks … with a growth bias, a buy/write overlay and drinks afterwards.
The FMA or someone with a clue as to what best practice looks like needs to mystery-shop CPD and start again.