Dodds: All Blacks must be better than club rugby

Advisers who are thinking about ducking personal liability by becoming financial advice representatives under the new regime have been given a serve by Institute of Financial Advisers chief executive Fred Dodds.

Thursday, March 23rd 2017, 6:00AM 4 Comments

by Susan Edmunds

The Ministry of Business, Innovation and Employment has published a series of questions and answers on the proposed new rules to govern the financial advice sector.

The exposure draft of the Financial Services Legislation Amendment Bill is out for consultation.

One question asks: Why would anyone be a financial adviser if they can have the lesser personal liability of being a financial advice representative?

“Some scenarios in which a consumer seeks financial advice will involve a level of complexity or uncertainty that cannot be adequately addressed using a financial advice provider’s predetermined processes, controls and limitations," MBIE said.

"In these cases only financial advisers - whose advice will not be strictly bound by processes, controls, and limitations - will be able to give advice. We think that will be a compelling reason for many individuals to become financial advisers and for many providers to want to engage financial advisers.”

Dodds said any advisers who wanted to “go and hide under an FAR rock” had no pride in the profession.

He said there was already a problem in that the existing regime had professionalised a subset of advisers, who had become AFAs and were seen to be more qualified than RFAs or QFE advisers.

But the new rules would diminish hat professionalism and make all advisers look the same, he said.

“If you take someone who is an AFA in a bank, if the bank decides all their existing AFAs are going to be FARs, the private banker or wealth investment adviser is not different to Betty down the corridor doing house and contents over the phone," he said.

"Stand up, guys. We’re trying to build a profession of financial advice. If it means personal liability, so be it. If you want to be an All Black you have to be better than a club rugby player.”

He said it was frustrating that while Australia was moving to higher qualification standards for advisers, "here we are effectively kicking level five to touch".

Tags: Financial Markets Conduct Act

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Comments from our readers

On 23 March 2017 at 9:58 am Brent Sheather said:

This is good work from the IFA. A more aggressive approach is needed whereby we forget submissions and embarrass the perpetrators of financial crime into doing the right thing by going public as loudly and as publicly as possible. Everyone knows that submission doesn’t work and is just a political manoeuvre to make it look like you have consulted and thereby make the victims of the crime complicit in the crime.

On 23 March 2017 at 10:28 am Doddsy said:

Thanks Brent

Fred

On 23 March 2017 at 1:37 pm dcwhyte said:

The lack of response mentioned is a reflection of the cynicism many stakeholders have toward the consultation process.

For example, having talked with many senior management figures within the industry, the consensus that there should be a distinction between sales and advice was evident. Yet this was cast aside in the midst of the consultation process by the regulator. The so-called process hadn't even been completed before the decision was taken not to create such a distinction.

With this fundamental aspect of an effective regulatory environment being discarded by FMA, it's little wonder many regard the submission process as an exercise in futility.

That said, I've sent my submission which includes recommending that consumer confusion - already identified by MBIE's own 'Final Report' (p.51) - be addressed. But I have my doubts whether this - or anyone else's recommendations - will be heeded.

On 24 March 2017 at 11:05 am R1 said:

This is a critically important for investors and the credibility of our industry. I am thinking that the only way to make this issue truly public is for full page advertisements to be placed in the key newspapers (if they will print them - the advertising QFEs may lobby them) spelling out the issues, current problems with the draft and inviting people to raise the matter with their politicians and QFE service providers. I would be happy to contribute to an IFA fund for this purpose and I am not a member; yet. A very worthwhile and valuable exercise for the IFA/PAA/FANZ to undertake and promote the creditability of the independent advisors? Your thoughts Fred?

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