by Susan Edmunds
Robert Oddy
Industry body SiFA submitted on the review’s options paper and said while it seemed clear that MBIE wants advisers who are not authorised to be brought up to the same regulatory level as those who currently are, it is not obvious why.
Robert Oddy and Murray Weatherston wrote that there was insufficient evidence that those who were operating as RFA or QFE advisers were doing harm because of it.
“The poorest reason for raising the regulatory bar for non-investment financial advisers is because they are now regulated differently from investment advisers. Surely you should be demonstrating problems and harm before even starting to consider regulation."
They said MBIE had argued that it did not want to change the exemptions in the law for lawyers and accountants, because there was no evidence it was causing consumers harm.
“Why would you treat similar issues differently?”
They said the cost of the existing regulation to the industry had been more than $100 million and had not provided benefits near that level.
Weatherston and Oddy said: “Raising the regulatory bar for investment advisers has had some perverse outcomes. Making it harder (more paperwork; more costs to the customer) for genuine advisers to provide advice, has led to many potential investors turning to their family, friends, neighbours, tip sheets or their lawyer and accountant for advice. Perhaps all these people should be brought into the regulatory net as well?”
But they said, if it is inevitable all registered but not authorised advisers are to face increased regulation, package three of the proposed changes seemed the best option.
But they would make significant changes to what MBIE suggests, including separating the Code Committee from the FMA and have it publish guidance notes.
They would also want the Financial Advisers Disciplinary Committee to handle cases against all advisers, including those in QFEs. “The FADC should be made completely independent of the FMA – we see a huge conflict of interest with the FMA both providing support to the committee and having the enforcement/prosecutorial role when an adviser is before the committee.”
They also rejected the idea of entity licensing, calling for individual licensing to continue.
Salespeople not providing advice should be required to give a warning they were not putting the client first but should be allowed to offer products from more than one provider, they said.
Oddy and Weatherston said it seemed likely that little would change for AFAs as a result of the review.
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I find it a bit of a stretch that regulation has caused potential clients to turn to friends and neighbours for advice. But I totally support keeping licensing with individuals. The alternative will only give rise to new issues for the industry.
Although there are some aspects of regulation and new reporting that can be frustrating, that's all it is. Yes it has added costs but those are partially shared by my clients as it should be.