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Self-regulation a focus for 2015

Increasingly stringent self-regulation of the adviser industry is likely to be a key focus for professional bodies around the world over the coming 12 months, the president of New Zealand’s Institute of Financial Advisers says.

Tuesday, January 20th 2015, 6:00AM 4 Comments

by Susan Edmunds

Michael Dowling pointed to Canadian advisers’ association Advocis, which is lobbying for increased standards for financial advisers in that country.

Its vice-president of regulatory and public affairs, Ed Skwarek, said advisers needed stricter standards, to be able to justify consumer confidence. “In a country which has professionalised everything from accountants to veterinarians, it is surprising that anyone can hold themselves out as a financial adviser, regardless of training, licensing or financial acumen,” he said.

Skwarek’s organisation wants it to be mandatory for all advisers to be members of an accredited professional body, which would then be responsible for ensuring they met standards such as continuing professional development.

Dowling said there was a strong focus around the world on raising the professional bar and greater consumer protection through higher standards for advisers. Australia was going through a similar evolution.

Dowling was at a conference in China at the end of last year where it was made clear how strong the drive in that country is for comprehensive ethics training requirements for financial planners. “There’s also a lot of anti-corruption regulation coming through.”

He said ethics requirements had been mandated in the past but had fallen by the wayside. “It may be something to pick up again.”

IFA is involved in a joint venture with the Institute of Business Ethics to deliver business ethics training to its memberships.

Dowling said the courses that had been run so far had been well attended and he expected interest to increase over the coming year.

“It’s time to recognise the interest in ethical training and the international move to encourage self-regulation and improve minimum qualification requirements. I’m sure the FMA is across this stuff and keeping it in mind with the review [of the FAA]. Internationally, there are a number of different issues put forward by various territories but they could up with similar perceptions of what the solution might be.”

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Comments from our readers

On 20 January 2015 at 9:19 am Brent Sheather said:
Heaven help us if advisor associations are allowed to self regulate. There is a name for this silliness and it is “putting the foxes in charge of the hen house”. Anyone who thinks the IFA’s moves might have merit should read Gareth Morgan’s book “After the Panic” and in particular the sections documenting the IFA members’ contributions to the finance company debenture disaster. I regularly reviewed financial plans by IFA members based in Tauranga and virtually every one was dominated by finance company debentures.

There is a clear implication that a disproportionate number of IFA members were remunerated by commission. If that is still the case then ethics training is probably a complete waste of time. Incidentally it’s probably a complete waste of time anyway.

My guess is that if AFA’s were compelled to join an advisor association the IFA would not be anywhere near the top of the list.
On 20 January 2015 at 2:33 pm Pragmatic said:
I tend to agree with Brent on this one. As an industry, we've been there tried that, and failed. The government has now introduced an industry policeman to reinstate consumer confidence and enforce (as opposed to make) the rules. I'm not sure where that leaves the various industry bodies, which will need to offer good reasons to join/renew in exchange for their fees
On 21 January 2015 at 8:23 am Steven Popodopolus said:
The industry groups main value now lies in providing lobbying against the FMA bureaucracy that will strangle out this industry as anyone who has completed an AML/CFT audit or has provided 72 pages of paper for a Kiwisaver transaction.
On 21 January 2015 at 9:47 am dcwhyte said:
Not sure about the case for the "international move to encourage self-regulation". The Canadian association may be advocating this, but there's no report on the response from the Canadian regulator. Australia's adviser associations are certainly proposing elevated standards of education, qualification, etc., but I can't see any evidence of self-regulation being promulgated. Recognised Professional Bodies (RPBs) were tried in the UK and abandoned due to perceived (and real) conflicts of interest. The strength of regulation is the ability of those who are regulated to point to a robust, credible, and valid system of external supervision. However much the status may be desired, Financial Advisers are not in the same space as lawyers and accountants. Don't think self-regulation has much of a future.

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