Did issues paper miss opportunities?
This week’s Financial Advisers Act review issues paper raises a number of important points but misses some too, the PAA’s compliance expert says.
Friday, May 29th 2015, 6:00AM 
1 Comment
by Susan Edmunds
Angus-Dale Jones, PAA board member and NZAM head of compliance, said the goals the paper identified to drive the review of the legislation would be vital to the direction it took.
The paper says the goal for financial advice is that consumers have the information they need to choose an adviser, advice is accessible and public confidence in advisers is promoted.
But Dale-Jones said this was too much of a “one-size-fits-all” approach and did not consider the possibility that many consumers did not want a full financial plan each time they sought advice.
At present, offering limited advice is difficult because of advisers’ requirements to prove the suitability of their advice to clients. He said that needed to be addressed in the legislation, not left to the Code Committee to manage.
“I would add as a goal statement something about the extent and scope of advice and how the Act can make it more viable to tailor advice to a specific context.”
The Financial Service Providers Register (FSPR) and external dispute resolution schemes are also up for review.
Dale-Jones said the paper seemed to have missed an opportunity with the FSPR. "It doesn't take advantage of the beautiful monopoly the Companies Office has on all this data."
He suggested the FSPR could be used in the same way MBIE's "disclose" site handles the primary disclosure statements for investment offers, under the Financial Markets Conduct Act.
Clients could be directed to the register for access to adviser disclosure statements and to compare advisers.
And when it comes to external disputes resolution services (EDRS), Dale-Jones said he was not sure the approach being taken was the right one at all.
The issues paper says its goals for EDRS are that consumers should be aware of disputes resolution schemes, be able to access and have confidence in them.
But Dale-Jones said that missed the point that they might not be the right solution to the problem of a lack of consumer redress.
He said it was worth asking whether there were other options. In Australia, NAB has started a consumer advocacy division, which he said could produce better consumer outcomes at an institutional level.
But Dale-Jones said there were a number of aspects of the issues paper that he was happy about, such as the commentary about the role of professional associations and the cost of regulation. "It gives us the opportunity to work with members to make sure the information comes through."
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Angus is reported as making 3 major points here. I would grade him an A+, a "why did you bother" and an F.
1. The first point I totally agree with; he hits the nail smack on the head when he talks about the need for a clear statement that it is OK to do less then a full plan for every client.
When I go into the supermarket, there is no regulation that says the shopkeeper has to take me down every aisle and ensure I am advised on everything in every aisle. And if I won't do it, go away....
We should be able to do less than the whole 9yards when either a client doesn't want it or we believe that the lot is not required.
How better to scare off prospects by telling them that unless they want to pay for the full plan, we can't help them.
I think we need a better name for what this is, though, than "limited advice" or "scalable advice". My current favourite is to call it "piece by piece" advice.
2. On his second point - having all primary disclosure statements on the register - I don't see the point. Given that legislation prescribes the words in our Primary Disclosure statement, why not just print the template - the only thing that differs from adviser from adviser is their name and address, which EDRS they belong to, and which fees boxes they tick.
I really wonder if any politician policymaker or regulator has ever got 10 separate Primary disclosure statements and put them down side by side, and then tried to explain how in heaven any one of them would help a potential customer choose among them.
3. And as reported on his 3rd point, EDRS, I reckon he has completely missed the point. The only time an EDRS is called into play is if the adviser has not been able to solve a complaint with her client. NAB's new initiative is likely to affect NABs clients only so it is surely an internal complaints mechanism. Unless of course NAB are setting up a bureau to handle complaints people have with their competitors as a new client gathering strategy!