Lawyers argue exemptions should stay
Lawyers say there is no evidence that the Financial Advisers Act exemption that allows them to offer financial advice in the normal course of their business is having any detrimental effect on consumers.
Wednesday, February 24th 2016, 6:00AM 
12 Comments
by Susan Edmunds
Lawyers and accountants can provide financial advice outside the scope of the FAA when it is an incidental part of another business that is not a financial service.
Concerns were raised about the fairness of the exemptions in submissions to the FAA review issues paper.
The Institute of Financial Advisers (IFA) said it could see no reason why an accountant or lawyer who went beyond “discuss and consider” situations and made specific recommendations about an investment portfolio or insurances should not be subject to AFAs' requirements.
But MBIE said in its options paper that it was not something that it was proposing to change because there was a lack of evidence of any consumer harm or consumers being at risk.
Rebecca Sellers, convener of the Law Society’s commercial and business law committee said lawyers were fully regulated under their own occupational legislation, which required them to provide an independent service, not act if there was a conflict of interest and must meet competency and qualification standards.
“For these reasons the Law Society supports the proposal to retain the existing exemptions from the Financial Advisers Act regime. The Law Society’s view is formed on the basis that the it has no evidence that the exemptions are having a detrimental impact on consumers’ financial outcomes, or on the professionalism or consumer confidence in the financial advice industry. Any person with evidence to the contrary should submit on the options paper and provide their evidence to MBIE,” she said.
One adviser who did not want to be named said she had concerns that some lawyers did not fully understand investment management, even around issues such as PIE tax rates.
“What’s normal course of business,” she said. “Are solicitors and accountants going outside the parameters? They are not always well educated on how modern investors make money. There are times when that exemption causes concern.”
SiFA has asked its members for examples of situations where the exemption has been a problem.'
Submissions on the options paper close on January 29.
A spokeswoman for MBIE did not say whether engagement over the exemptions had changed its view.
“The consultation on the options paper closes on Friday, after which officials will review and analyse all the feedback and submissions. The individual submissions will go online in due course.”
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He would appreciate me pointing out that there is also no evidence that builders giving financial advice would have a detrimental impact on consumers’ financial outcomes, or on the professionalism or consumer confidence in the financial advice industry. On this basis my builder would also like to be exempted from the FAA and give financial advice in the normal course of his business.
Previously, the first reason offered referred to the claim that lawyers are already adequately regulated. They may be - but not in the areas of investment or risk insurance advice. Nothing in their training provides for the remotest competency in asset allocation, portfolio management, or personal risk analysis and planning. Nothing in their professional supervisory body suggests competence in overseeing members practices in the investment and risk space.
The second reason proffered relates to the lack of evidence of harm visited upon consumers. Every schoolboy knows you cannot 'prove' a negative and, from a prudent regulator's perspective, the lack of evidence does not prove the lack of existence, only that no such wrong-doing has been discovered.
Such an exemption could likewise be claimed by other advisers - as Murray Weatherston so politely and succinctly inquired of the FAA Review session in respect of mortgage and F&G brokers - what problems are the regulations trying to fix?
Even accepting the need for regulation - as most of us do, I suspect - providing an exemption to one segment of the market merely serves to dilute the impact and confuse the consumer.
In any event, there are plenty examples of CAs who have recognised the need to be competent in the investment and risk space and meet the standards of the specialist knowledge required by obtaining AFA status.
There is no reason Why lawyers should be given special treatment.
No exemptions, no exceptions!
i read an article from a learned judge some years back, he said something to this effect - contracts can be written in plain language, as long as they are unambiguous & have proper witnesses, it will be upheld in the court of law. there you go guys, save some money.
talking about unambiguous, seems that a lot of laws are ambiguous - always wondered why?
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