Return 'may just add work for advisers'
Industry participants were scathing in their response to the first draft of the new information return advisers will now have to complete annually. But the changes the FMA has made in its second attempt have been cautiously welcomed.
Wednesday, March 26th 2014, 6:00AM 
1 Comment
by Susan Edmunds
The regulator has issued a second consultation paper on the proposed reporting requirements for authorised financial advisers, including an updated version of the information return.
The return is a detailed questionnaire running to more than 20 pages that asks for information about the adviser and their business.
One of the least popular aspects of the original draft were questions such as “what was your gross income from financial adviser services for your last completed tax year” and for details of how the adviser’s income level had changed, year on year.
Adviser Carey Church made a submission: “What is the purpose of requesting information on my personal income from financial adviser services? What is this information going to be used for? What is the precedent for requesting this information? My personal taxable income and share of the profit from my work is personal and confidential information."
SiFA agreed with her: “There is no other regulated profession or occupation in New Zealand of which we are aware where individual participants are required to notify their incomes to the regulator. This question generated the strongest negative response from surveyed AFAs.”
But in the latest draft of the return, those questions have been removed. It still asks for details of any “benefits” that advisers have received from providers, such as training, entertainment, travel or tickets.
Church said she was impressed that the FMA seemed to have considered the industry’s response.
“I’m really impressed with the fact that they’ve obviously noted the feedback and adapted it a lot, it’s more user-friendly but there are still some areas that will be difficult for practitioners to fulfil.”
Submitters suggested it could take anything from a day to two weeks to accurately fill out the return, which asks for everything from details of their revenue by advice type to details of reporting to clients.
SiFA also had concerns about the significant time and expenditure that would be required to collect previously unrequired data. It said some of its members had indicated they would need new CRM systems to track the information.
Some of its members were worried that further compliance requirements could push what was expected of AFAs to the level where it could only be managed by institutions.
Former chairman Murray Weatherston said increasing regulatory requirements could drive more advisers away from the sole practitioner model. “One take on that was that it was the intention of regulation anyway.”
The Institute of Financial Advisers also submitted that it was concerned that the reporting requirements would be an added burden for advisers.
President Nigel Tate said it was disappointing that the newest version still required annual submitting on September 30, instead of alongside other required reports or reauthorisation. “I would rather it was done in concert with other requirements, to reduce complexities.”
He said it would make sense if the return was tied in with the submission of ABS documents and CPD plans. “If this could have been done and able to replace these other things, it would be a positive move. If this is just another separate thing to be done, that’s an issue.”
Banks also made submissions – ANZ suggested AFAs within a QFE be exempt from the requirements, or for there to be a separate return that would reflect the QFE model. The return has been redesigned so that advisers in a QFE do not have to answer questions that are not relevant to them.
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Someone stated that the FMA is a group of individuals who actually have no financial(advisery) background?
Other professions such as legal and accounting examples do not have their equivalent of an FMA!
The FMA has not been able to demonstrate any added value that would be expected from true regulation and the expectations of subsequent results?
Surely it must simply be one of the largest problems is to identify the blatant stealing of investors money, be it by related-party lending or the in-your-face ponzi things such as the relatively recent Ross Investments scam?
If a dedicated FMA is to take blame for letting the Ross one exist for so long, surely they should expect to be sacked as equally so as would a financial profession body who was expected to expose such blatantly unacceptable stuff?
"Regulation" has always existed, eg; a prospectus...however that offered no protection for investors leading up the the recent big GFC.
A small number of directors of finance companies were dumped into jail, or otherwise penalised for supposed poor practice when dealing with investors money, yet every one of the related finance companies transacted all their business with the open use of a prospectus.
My question remains as follows..... why have we never seen the TRUSTEES of each prospectus reprimanded for lack of good practice, when their role was very clearly and simply to act as TRUSTEES, and we all must notice the word TRUST within their title?
If the TRUSTEES had done their job, there would be no need for any FMA.
Just as the legal and accounting professions work so well without their equivalent of an FMA?
there are several within the industry that I am aware of who state an obvious opinion that the FMA is simply not a sensible solution to providing any form of over-seeing of such an important profession as 'financial planning?'
Surely a couple of competent ex financial planners could provide a service of the quality that current financial planners should demand, and possibly without even needing to dedicate a full 40 hour week to the role to be effective?
It has been suggested that it should only require a very small group of competent experienced people to be able to expose 'any' such scams as ponzis, and certainly not the number of years as the FMA has existed.
What on earth is expected to be discovered from a survey of how much a financial adviser earns in a year....other than that most of them are most likely underpaid for their sincere efforts.? Michael Donovan