Dodds: Higher requirement inevitable
New Zealand’s financial advice sector “seriously needs to wake up” to the need for degree-level qualifications, says the chief executive of the Institute of Financial Advisers.
Monday, May 18th 2015, 6:00AM 
18 Comments
by Susan Edmunds
Fred Dodds pointed to Australia, where requirements are being lifted quickly.
NAB, which owns BNZ in New Zealand, wants advisers in Australia to have a degree and certified financial planner (CFP) accreditation by 2017.
Dodds said the New Zealand industry needed to understand that a higher-level qualification requirement was inevitable.
“We need to understand that if we want to be seen as a viable industry and association, it’s the way to go. Young people coming in now have got degrees, we need to do that. One of the fascinating things is what do you do when you’ve got to take people yelling, screaming and kicking to the higher level?”
He said some experienced advisers would argue that extra qualifications would not alter the type of work they did.
"But there needs to be understanding that it gets down to personal pride and professionalism. To say I'm a professional and I have gone the extra mile and done some study."
Professional bodies had a role to play taking the lead, he said.
The IFA administers the CFP standard in New Zealand but Dodds said it was unlikely to become a requirement for advisers here.
Meanwhile, the Chartered Financial Analyst (CFA) society in New Zealand wants them to go a step further.
CFA Society president David McCallum said the CFA society in New Zealand has 280 members, most of whom are in fund management roles.
McCallum said the society’s long-term goal was to build its AFA membership. “CFA globally has that target. Historically it grew out of an asset management and institutional focus but we have identified that more and more over time the individual wealth advisers are very important and targeting that area is something that is of interest.”
AFAs would benefit from CFA status because the qualification required was a high standard, he said.
Dodds said there was a wider need to promote financial advice. “How do we get people to say ‘I do need one of those guys, they know what they’re talking about’?”
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On 18 May 2015 at 11:51 am intrigued said:
“I think that Mr Dodds is suggesting that in order that this does not happen again then to use an analogy – KNOWLEDGE is knowing tomatoes are a fruit – WISDOM is not adding it to the fruit salad.
And perhaps that is about education Brent – how is YOUR diet
On 18 May 2015 at 11:51 am Pragmatic said:
It's worth recalling the facts on finance company debentures to balance the previous response. 80% of finance company debenture investments were direct (ie: using clip outs from newspaper & TV advertising) with the remaining 20% intermediated (ie: through an adviser).
Whilst a number of advisers who supported finance company debentures, did so without proper due diligence, time (& court cases) have demonstrated that some of the data that was being relied upon by advises was incorrect.
I'm not defending the actions of those advisers who used finance company debentures, merely ensuring that the discussion is kept accurate.
On 18 May 2015 at 1:25 pm w k said:
@brent: i smell that too .... i can hear the gravy ch$$ ch$$ train.
i know an adviser who set up his own practice. spent thousands, over $5k i think, to do some courses against my advise to concentrate building up his biz first. the result: firstly, those courses were not mandatory, secondly, the moderators could not answer some simple questions, and finally, it caused him much stress.
On 18 May 2015 at 3:38 pm janscott said:
At present there are 174 financial planning degree programs in the US--undergraduate, graduate and doctoral (not including the 186 certificate programs). AUS has 48 Master's degree programs and the UK has 3 Master's degree programs. This should put the education standards in NZ into a more objective perspective. In order for financial planning to be viewed as a legitimate profession, there has to be appropriate education standards for advice providers. On 19 May 2015 at 9:37 am Brent Sheather said:
Hi Janscott
Thanks for adding that “perspective”. Here is some more perspective – despite the USA having 174 financial planning degree programmes the Office of the President of the United States saw the need in February 2015 to commission a report entitled “The Effects of Conflicted Investment Advice on Retirement Savings”. Highlights of this report included an estimate that bad advice cost Americans US$17 bn a year and that in one analysis of a workplace retirement plan with and without advice the participants without advice outperformed those with advice.
But wait there is more – despite Australia having the benefit of 48 Masters degree programmes a recent survey by ASIC found that just 1% of financial advice could be described as being good. I wasn’t great at maths but I think I got higher than 1% in School C.
We can conclude therefore that either the education was a waste of time or the “educated” had their eyes on other variables, probably beginning with a dollar sign. Obviously education needs to be done properly and this thus rules out most of the local players. Education has been captured by industry.
Regards
Brent
On 19 May 2015 at 10:43 am traveller said:
Is there any evidence that investors are getting better advice today than they were, say, 20 years ago? On 19 May 2015 at 11:38 am Keith Walter said:
Again the confusion our current system of designation has. This relates to INVESTMENT advice.
I believe you would struggle to concoct a tertiary-level qualification around solely 'life' insurance advice.
This again reflects my call for separate designations - and qualifications - for elements of so-called financial advice; i.e. Investment advice, Life Insurance advice, General Insurance advice, Mortgage advice etc with. perhaps, Financial advice when ALL areas are covered.
On 19 May 2015 at 1:37 pm janscott said:
@Brent Seems like a pretty hasty conclusion based on limited research. Financial planning is a fairly young field--about 35 years and just sniffing at being properly regulated world-wide. To truly evaluate the 'success' of education programs it would take at least one comprehensive international/national longitudinal study (across time) which includes metrics of 'success' associated with education programs. Definitely not saying that more programs equals better consumer outcomes. Just that it's too soon to tell and sound bites aren't helpful at this point in time.
@traveler--depends on how you measure 'better advice.'Do you means in terms portfolio performance? Insurance adequacy? Tax efficiency? Different metrics used to capture 'value.'
On 19 May 2015 at 1:55 pm janscott said:
@Brent Seems like a pretty hasty conclusion based on limited research. Financial planning is a fairly young field--about 35 years and just sniffing at being properly regulated world-wide. To truly evaluate the 'success' of education programs it would take at least one comprehensive international/national longitudinal study (across time) which includes metrics of 'success' associated with education programs. Definitely not saying that more programs equals better consumer outcomes. Just that it's too soon to tell and sound bites aren't helpful at this point in time.
@traveler--depends on how you measure 'better advice.'Do you means in terms portfolio performance? Insurance adequacy? Tax efficiency? Different metrics used to capture 'value.'
On 19 May 2015 at 2:35 pm John Milner said:
w k, I commend the adviser you quote. So what if the course was not mandatory. What a crap attitude. My business diploma, CFP and CLU papers weren't mandatory. Nor was the level 5 cert back in 2007 when I did it. Those that wait until they are forced to be educated I guess are content to operate at the bottom of the food chain. On 19 May 2015 at 6:28 pm w k said:
john milner, read it in its full context. did you not read he just set up his own biz? don't you think he should stabilize his biz (income) first?
you are are financial planner right? which is more important, income or paper?
On 19 May 2015 at 6:35 pm w k said:
btw, john milner, all the education does not necessary equate to an honest professional adviser. how many well educated ones are in jail now?
i also did all of mine which was not mandatory then but only started well before a lot of advisers. i did those course only after my biz has been stabilized, that is, i have enough money to feed myself first.
On 20 May 2015 at 10:10 am Pragmatic said:
@wk: have I understood you correctly? Do the business first, then learn what to do. On 20 May 2015 at 11:58 am w k said:
@pragmatic: glad you asked. he's been in the trade for 10 years and did all the in-hse training. left to the company to start on his own. so he's not a newbie. hope that clarifies. On 20 May 2015 at 12:35 pm Brent Sheather said:
Come on Pragmatic, that’s the standard business model. Indeed many people, if not most, never learn to do the right thing where the right thing is evidenced by the portfolios of the average pension fund. It is far easier and profitable to have a huge disclosure document rather than put clients’ interests first. Really Pragmatic, this is finance 101.
Regards
Brent Sheather
On 20 May 2015 at 5:43 pm w k said:
ok. you guys judge if i qualify in this biz at all. i don't mean to brag, that's why i choose to remain anonymous like some of you.
i've got 3 prof qual, including fp, and two tertiary qual where i did acctg, corp finance & economics. they're all level 5 to 7. i may do post grad or masters later but that's nothing to do with this biz.
none of my clients know my full academic background as it is not necessary. they do biz with and have confidence in me because of ME. and i have very good relationship with my clients. if they don't like me, whatever amount of qual i have, i won't get their biz anyway. i also choose my client and how i deal with them. example: an ex-client's lawyer rang me to do a risk for her. i told the lawyer in no uncertain terms, she want my services, she pay upfront in full before i start work - never heard from her again. and my biz card does not show any of my qual, and no, don't even a title - tempted to put salesman.
now, having all those academic qual need not necessary mean i am better than those who have lesser qual. i know that cos a good friend of mine don't have half of what i have and i know he is better than i and i do seek his advice from time to time on certain matters.
lastly, i am a rfa. as far as i know i don't qualify to be an afa.
on another matter, i think pragmatic will make a better fp than jm, cos he clarifies questions not just jump into conclusion. isn't that important in fp?
On 20 May 2015 at 5:53 pm Pragmatic said:
Thanks for clarifying.... Sign In to add your comment
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Regards
Brent Sheather