Regulation 'could push RFAs out'
Requiring registered financial advisers to meet the compliance standards of authorised financial advisers would be complete overkill, says the former general manager of the PAA.
Monday, October 6th 2014, 6:00AM 
9 Comments
by Susan Edmunds
There has been debate in recent weeks about the future of the RFA designation.
It is expected to be one of the aspects of the Financial Advisers Act put under scrutiny when it is reviewed next year.
Code committee chairman David Ireland said he thought the extent of RFAs’ disclosure requirements was inadequate compared to AFAs’ obligations. Massey University school of economics and finance senior lecturer Mike Naylor said RFAs might need a new title because it was hard for the public to understand the difference between a registered and an authorised financial adviser.
Jenny Campbell, former PAA general manager and now chief executive of the Mortgage Supply Co, agreed a name change could be a positive move.
But she said there was no merit in requiring RFAs to comply by AFA-level rules.
“It would force them to yet another level of paperwork for no reasons.”
She said all the RFAs in the market were upstanding professionals and those who were still around post-regulation were the ones who “really know what they’re doing”. “If you talk to the dispute resolution schemes, there are so few complaints about our area. Everyone’s really happy with the level of paperwork they have to do currently. They’re following good processes, that’s borne out by the lack of complaints. I’m worried about regulation by stealth.”
But Campbell said she had always got the impression that the FMA was not totally comfortable with the RFA designation. “They talk about it being an interim measure. They’ve got to understand our market is different to the rest of the world to a degree. If you want to work as an insurance or a mortgage adviser, you’ve got to be good. There aren’t enough people to support poor performance. If you have a bad reputation you won’t last long.”
Some RFAs would drop out of the industry rather than deal with AFA-level compliance requirements, she said. “If the idea is better advice for consumers, merely giving advisers more paperwork doesn’t mean consumers aren’t getting advice, just that the adviser is covering their butt. The general public needs more advice, not less.”
Too much compliance would drive independent advisers out and lead to consumers being forced back to dealing only with the big providers, she said.
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Yeah Right
I simply don't believe that commission disclosure is a huge issue for RFA's, as many already volunteer this info to clients.
However, I do have several key concerns about further regulation -Firstly, there are significant costs associated with AFA level compliance. There are extra FMA levies, AML/CFT audit costs, and a whole bunch of extra paperwork (extra disclosure, AML reporting etc) that arguably the consumer has zero interest in.
If we make the process of getting advice too difficult, too time consuming, or too heavy on compliance paperwork, then the general public will walk away from advisers.
This would be a terrible outcome for consumers, as 'independent' or 'unaligned' advice is a crucial service that most advisers offer.
As Jenny rightfully says too much compliance would drive independent advisers out and lead to consumers being forced back to dealing only with the big providers. The banks would just love that!
Having done many over the last 3- 5 years and gauged the responses from RFAs regarding disclosure of commissions you might have a better insight.
As for RFAs being subject to AML requirements, well where does that come from?
Only advisers regardless of designation that are involved in providing a financial service in respect of a cat 1 product are caught and that includes RFAs that sell Kiwisaver under class advice etc.
If you aren't sure the FMA website is really helpful.
FMA levies are irrelevant as they only apply to specific designations. RFAs already pay a levy and no one's saying every body has to be an AFA - and neither was I.
My point was that really good advisers AFA or RFA should not be concerned. All those that act professionally will cope and it will not impact on consumers getting good advice - instead of scaremongering why not focus energy on being positive and encouraging to potential younger advisers to come into the industry. Your comments don't help promote our profession to the younger generation.
Hi Amused - I totally support small independent adviser businesses. The industry needs support to raise the bar for consumer confidence.
Yes the Regulator has been captured by the "big" end of town to a large degree but there are compliance business's dedicated to helping "small" "independent" practices "not" TO GET BOGGED DOWN with it all and to spend as much time as possible doing what they do best - advising clients.
The reality is that there are now regulatory rules etc so why not get on with it - who was it said "trying to fight city hall was a waste of energy"? Focus on the positive it's a lot more fun and rewarding.
Thanks for your comments. I had to smile though. On the subject of disclosure its not as though you have an agenda yourself in wanting more paperwork for RFAs is it?
You have a point- I should declare a conflict of interest as my writings on this site may well bring me more business. It's why I use my own name.
Saying that I still stand by my comments that professional advisers are trying to comply but sometimes need guidance. Wouldn't it be a great profession if it didn't need consultants like me?
We could probably do away with the FMA as well.
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The 3 key compliance differences between an AFA and an RFA are (1) qualifications (2) disclosure & (3) the Code. If i've missed any key differences I am sure someone will let me know. So which of these do you think will create so much more of a work load to prompt good advisers out of the business? Some risk advisers and mortgage broker voluntarily became AFAs and I dont' think its likely that the qualifications will ever be required to be the same. That leaves 2 areas. Good advisers will more than likely comply with all the AFA code standards anyway so that now leaves disclosure. From my experience with RFA in a compliance sense this is the big stumbling block as they don't want to disclose their remuneration. Other than that I'm not sure why there is such a fuss as I have always maintained that a good adviser (RFA or AFA) will comply with the code standards anyway as that is what professional do.