We have the rules, but how will it work?

Advisers are hoping upcoming workshops will provide more clarification from the FMA about what personalised DIMS will look like under the FMCA.

Friday, November 21st 2014, 6:00AM 4 Comments

by Susan Edmunds

The FMA released a consultation paper yesterday on the eligibility criteria for providing personalised DIMS.

These include four key areas: Capability, operational infrastructure, financial resources and governance. AFAs who are currently authorised to provide DIMS don’t have to apply for permission to continue, but must meet the new criteria by the middle of next year.

But advisers say there are still areas of uncertainty about how they will be able to go about providing personalised DIMS.

The paper says the definition of personalised DIMS focuses on the design of the investment strategy, not the design of the investment portfolio. But investment strategies must be both devised and implemented without reference to a model portfolio.

FMA spokesman Andrew Park said: “Personalised DIMS does not include an investment strategy that is merely customised from an investment strategy that applies to a class of clients. A model portfolio is designed for a class of clients. Using a model portfolio as a core part of the investment strategy therefore does not fit into the definition of personalised DIMS as it is merely customised from an investment strategy that applies to a class of clients. “

He said those who were unsure about the service they were providing should contact the FMA.

Adviser Alan Clarke said he doubted that many advisers would bother with personalised DIMS. “I can’t imagine many are going to do it.”

Most would opt for class DIMS or ask their clients to sign off on all decisions, he said.

One of the proposed standards for advisers is that they stress test their strategies as appropriate but Clarke said that would not be possible for many AFAs and they would have to outsource it.

Advisers should be encouraged to focus on what they were good at, he said. “I think my job is not to just build a portfolio but listen to issues to do with clients’ money and help them. People say ‘can I afford to lend my children money’, ‘can I afford to retire’, ‘how long will my money last’. That’s what I’m supposed to be doing, I thought. If I’m doing all that, how can I do that as well?”

The FMA is hosting DIMS workshops in early December.

Submissions on the consultation paper close December 9.

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Comments from our readers

On 21 November 2014 at 6:28 am alan clarke said:

I am still "wishing and waiting and hoping" to see if a simple DIMS is coming

Hopefully advisers using platforms running model portfolios and auto re balancing will not need a full DIMS license

But instead only need some sort of a simple DIMS license

I so wish the FMA would really consult WIDELY with us instead of making overkill rules that may not be really needed

good consultation gets "buy in" if done right but lack of it gets resentment and grudging cooperation

Money launderers are still running from my office before I get to question 3

At the risk of repeating myself, all AML needed was another clause in the code requiring us to run "know your client" interviews and report suspicious activities

Unburden us please so we can find time to find out what our customers want, and then help them get it

On 21 November 2014 at 9:01 am dcwhyte said:

Alan - couldn't agree more with your sentiment re 'good consultation'. I've been banging on for months now about not repeating the same adversarial experiences in the U.K. and Australia.

We have a real opportunity to develop meaningful collaboration with the regulatory body to create a regime which ultimately benefits the consumer, and does not create negative, divisive, and expensive enmity among the parties involved.

Hopefully, your request does not fall on deaf ears!

On 21 November 2014 at 9:01 am LPL said:

Alan, if your platform provider is applying for a DIMS license, and you only offer the model portfolios they offer, you are unlikely to require a DIMS license.
I understand that you will need to have an agreement with your client as to your role and how you operate. At this point I'm unclear what a compliant agreement of this nature would look like; hopefully the FMA will clarify that at this upcoming training.

On 21 November 2014 at 2:16 pm R1 said:

I suggest the same applies with clients "good consultation gets "buy in" if done right but lack of it gets resentment and grudging cooperation". Running platforms with limited products, fees and not always necessary "auto re balancing" and associated fees without their consent or understanding; just a thought.

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