Best way to solve FAA? Bin it and start afresh
One group representing financial advisers has told the Ministry of Business, Innovation and Employment that the best way to progress the Financial Advisers Act review is to destroy the legislation completely.
Thursday, September 24th 2015, 6:00AM 
4 Comments
by Susan Edmunds
SiFA has been having meetings with MBIE as it moves through its process of consultation with financial advice industry stakeholders.
The Ministry has received submissions on the FAA review issues paper and is preparing an options paper for release in November.
SiFA spokesman Robert Oddy said his group was asked what would be useful in terms of the review. “Our suggested was they should destroy the Financial Advisers Act completely and start afresh.”
He said regulation was adding about $100 million in costs for the clients of financial advisers every year, when the cost of running an AFA business, including authorisation and other regulations such as AML, were considered.
“Clients are having to pay that because no one else is going to sit back and pay it.”
He said there was little advantage for consumers when there were such large costs involved.
Oddy suggested that could be part of the reason that many investors decided it was easier to buy property instead. "Notwithstanding that they do not understand the risks."
He said his group had asked MBIE what the reason for regulation was, what problem it was trying to solve, and had not been able to receive a satisfactory answer.
But he said that if the burden of meeting regulatory requirements could not be eased in some way, or if the expectations on advisers increased, a significant number would likely decide to leave the industry. “There’s a certain point you reach where enough is enough,” he said. “If it’s not viable, why should you do it?”
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Comments from our readers
There has already been plenty of discussion about where the key FMA people come from, and where they end up, so just imagine what they might think about advisers finding the burden of regulation all a bit too much to bear.
The most effective discussion will be one that speaks to the objectives and accountabilities set down in the original discussions that were had prior to the FAA being drawn up. Pretty sure it was about confidence and security in markets and protecting investors. \
And getting rid of the cowboys.
On those measures yes, the whole thing might be said to not be working. In fact, the cowboys seem to have invaded the regulators. Sorry, couldn't help it.
It also felt like it was written as a lawyers' relief act--that is so it would make work for lawyers.
It did a lot to add costs and expense to advisers which did not in the end help clients in the least.
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For example I realise services like transactional service providers (eg FX dealing) may not be done by all advisers but it is by some and as such needs strong regulation.