AFAs set to produce their own annual reports

The extensive reporting requirements have been offered up as a means to ensure fair and efficient markets for investors. The information being asked for goes WAY beyond this scope and appears to be little more than a huge fishing expedition, with investors to ultimately bear the cost. The irony is that because advisers dealing only with 'wholesale' investors are outside these regs they are fishing in completely the wrong pond...

This proposed reporting comes at a very significant cost to AFA's. Say 1800 reports @ 4 hours per report @ $160 per hour = $1,152,000.

Yet another FMA consultation paper asking advisors to divert time and effort into making submissions .....Personally I won't bother until the FMA can issue CPD credits in recognition of the that time and effort involved.

If this is introduced it will result in more AFA's in smaller practises exiting the business. I know of a number of very experienced AFA's who are very close to pulling the pin due to the ever increasing compliance requirements. This may well be the final straw for some. If the endgame of the FMA is to drive the small players out of the market and leave advice up to the banks then they are on the right track.

Having had a quick go at completing the survey it didn't take too long. I did take a stab at some of the numbers and the specific numbers would take some effort to compile.

Those who don't have a comprehensive CRM system will find it almost impossible and will need to rely on data extracted from the platform providers such as Aegis etc.

When you add this annual report to the annual report required for AML/CFT the days of the sole trading one adviser with no admin support or compliance support are probably over.

One person adviser businesses will have to use technology to gain efficiency or be forced out of business by increased compliance costs such as these.

It appears that more and more time is being required of AFAs for justifying their existence. The FMA wishes to see more accessibility to advice, and clarity. My understanding is that at present there are only a couple of hundred non alighned AFAs in the country. If the FMA wants people to have choices beyond banks and aligned advice and product providers they are making life more and more difficult for the industry, advisers and consumers.

Perhaps I'm missing something.... as I read through the article a few times, and understood the FMA requirement to be about the adviser's business, rather than per client.

Whilst 4 hours per annum may be an inconvenience for some industry participants, it seems logical for a Regulator with limited resources to understand where to focus its attention....

I think the question that has to be asked is "What will this achieve?" In my view absolutely nothing! Will it ensure clients get superior advice? Will it mean more people can afford and have access to advice? Will it prevent poor advice? Will it increase consumer confidence? I think we will all say a resounding No! to every one of these questions. It sounds rather like civil servants trying to grow their patch. There’s a double cost to the collection of this data, there is the time advisers are away from looking after clients and the cost of the FMA analysing the data, which I’m sure will ultimately be passed on to the adviser! Much of this information is in the ABS, which needs to be updated at least annually as financial information changes. I see absolutely no benefit to the profession of giving financial advice or to consumers.

Absolutely agree with these comments. More overhead for AFAs and really this sort of thing maybe as Curious says “the final straw for some”. Certainly very depressing…it was the last thing I thought about before going to sleep last night.

I’m not even going to bother commenting on it. They should have started the questionnaire by saying “have you recommended finance company debentures in the past?” And if you had you had to fill out the stupid forms as punishment and if you hadn’t you were free to get on with your life. The southern Gold Coast (Cabarita) is looking better and better.

Regards
Brent Sheather

I have had a quick look at the consultation document and I have a number of comments about the wording and ambiguity of some questions, but there are several questions that I am quite concerned about.

There are some good and valid comments above my entry. It is good to see that people are thinking about this consultation document.

I am sure that for each of the 9 comments above that there are 50 or more other people who are thinking about the issue, and have opinions but choose not to comment on Good Returns.

This is an extremely important issue for our industry. I am concerned that people are not planning on spending the time to make a submission.


I will be spending a bit of time in making my submission to the FMA. Here are my reasons why:

1. It is a condition of our authorisation that we answer ALL the questions answered factually and accurately each year.
2. We can be sure that the QFE's, big adviser groups and their legal advisers will be making submissions. If we don't we are stuck with what the FMA and the QFE's say. We need to make our voices heard and take some control of our the regulations of our businesses.
3. You don't have to answer all of the questions - you can answer only the most important ones for you.
4. Your answers don't have to be long and detailed - just make your voice be heard.
5. Although I believe that the FMA look at Good Returns, a personalised submission with your name on it is likely to carry far more weight than an anonymous comment on Good Returns.

@Ally - I am no expert in these matters, but I would think that doing your submission would give you unstructured CPD Credits.

For people who have not had time to look at the document yet - I will share one of my personal concerns that I will be making an extensive submission on.
Why do the FMA need to know my personal income and my profit from my business? See Question 9 of the questionnaire.

I don't know about everyone else, but that is personal and confidential information to me - only my accountant and business partners know what my income and profit are. I consider this to be commercially sensitive information. And with all the Government Department privacy breaches (ACC, EQC, IRD, WINZ), I have little confidence that this information will be kept confidential. I don't understand how this information will assist the FMA in knowing whether I am doing a good job of advising my clients.

My submission will raise these points and suggest that if they want this information for statistical purposes, that they gather it through an anonymous survey where we can answer in 'ranges'.

There are other questions that I find unclear and don't understand the purpose (eg - what is the highest and lowest return you achieved for a client.) What is this information going to be used for? Comparing advisers? Seeing how risky our clients portfolios are? How do we differentiate between clients who are drawing down on their portfolios and those that are adding small amounts or large amounts?

PLEASE PLEASE PLEASE everyone take half an hour and make a submission. This effects your business, your income, your future. Remember, if you don't speak up, we will lose out to the opinions of the 'big guys' again.

Carey, a submission on this consultation paper may well earn unstructured CPD credits but, as per the Code Committee consultation paper, unstructured CPD will "not count" as from 2014. On the bigger issue, the FMA is like any other bureaucracy: it must justify its existence by always being seen to be "doing something" even if most of it is a waste of everyone's time (not theirs of course; they have nothing else to do).

I agree with Carey Church - I wonder how many of the respondents above have ACTUALLY gone through ALL of the questions - there seem to be some very specific questions about adviser businesses and personal situation that seem way beyond the scope of anything that could be gathered for useful statistical information, and on the face of it appear to be irrelevant and outside any reasonable legislative issues.

The industry needs to be sitting up and taking note – no other profession is required to provide such information to any regulator.

Had a go at the draft questionaire.

Did not take that long, but guessed in a few places, and to answer specifically may take some digging.

My main conclusion is that the questionnaire will not really get any useful information for the FMA.

For example, I suspect sole and small groups of advisors are using a lot of different legal structures. And this means that depending on the structure, the FMA will get quite a different picture. The role of Trusts owning an advisory business for instance muddies the water wonderfully.

Some questions are just useless. For example, the highest/lowest return question. Without any more info on the portfolios in question, I would have thought the info totally irrelevant. All the FMA will see is anomolies.

Many questions are just vague. For instance, how do you determine how long a withdrawal takes? If a client asks me today for some money by Christmas, and I sell something mid November to fund it, and I have it in cash till the day before, how long will the withdrawal take? Who cares?

Some questions are "gotcha" questions: please type "guilty" here if you have not met an AFA requirement, and let us know the address to send your fine to.

Overall, I think the questionaire is pointless, but fairly harmless.

"If this is introduced it will result in more AFA's in smaller practises exiting the business."

If your business is on such tight margins that 4 hours a year breaks the bank, then you would probably be exiting the industry soon enough anyway.

The same for if it is too much hassle, or if you are unable to provide the information because you dont know it.

Stop focussing on what you SEE and consider what you dont see. The question isn't how many crooks will this catch, it is how many dodgy operations wont now open for business?

"They should have started the questionnaire by saying “have you recommended finance company debentures in the past?”"

Or maybe they could ask whether you pay put your clients into active funds forcing them to pay active fees when you don't believe active management adds any value, and do so only to improve market efficiency even though your clients do not benefit at all from that improvement if it exists at all?

Seems a more appropriate question, I mean, given finance companies are effectively dead and yet that other practice continues in some firm right now.

One might fairly complain that this topic is not relevant to the discussion at hand...

Doesn't this illustrate, yet again, that the FMA hasn't a clue how this business operates?

Well said Carey!

Is it time for all advisers to write to the minister and meet with their MP to protest this nonsense being imposed on the industry by the FMA?

I suggest that if the minister receives letters from several thousand advisers and MPs get several thousand visits from disgruntled constituents, they might take notice and do something!