Code proposals 'baloney'
Advisers working for small advice firms would be left with little time to advise if the code working group’s proposals are adopted, SiFA has argued.
Thursday, April 12th 2018, 6:00AM 
7 Comments
by Susan Edmunds
The adviser group has made a submission to the code working group’s consultation process, as part of the development of the new code of conduct for all financial advisers.
The SiFA submission says it is speaking up for the small advice firms that will make up the bulk of license applicants under the new regime.
SiFA chairman Murray Weatherston and consultant Robert Oddy said small advice firms seemed to have been neglected.
“There are a large number of things in your paper you believe an organisation might or should do. Our question to you is this – if a sole adviser practice or small practice did all this stuff, how much time would be left to actually see clients? That abstracts from all the other regulatory imposts that we face elsewhere as advisers from AML, ABS, CPT plans and so on.”
Their submission takes issue with most of the group’s proposals – right from the assertion that “good advice outcomes” should be an overarching driver for the code.
Weatherston and Oddy said the public would hear that phrase and assume it meant that the product that was advised on performed well – the precise interpretation the working group said it wanted to avoid.
“We were at the Auckland consultation and our assessment was that the concept was thoroughly trashed – without any contribution from us.”
The working group has laid out a plan for separate qualification and competence requirements of advisers dealing with product advice and those offering full financial planning.
But Oddy and Weatherstron said many RFAs would be caught in the financial planning realm, though they did not yet realise it. As the proposals are currently worded, that would mean they would need a degree and level six diploma.
“The people who do product advice solely will be salespeople, pure and simple,” Oddy and Weatherston said.
“We believe your product advice/financial planning distinction is actually a euphemism for sales and advice. The biggest fraud that will be perpetuated on consumers is that when a VIO says that it is providing advice, it will actually be engaging in nothing more than sales activity."
Submissions close at the end of the month.
The pair said they had feared the working group would go soft on the qualifications required of RFAs. Instead, it had recommended tougher qualifications than were needed.
“Your proposal to give a free pass to AFAs into the new regime is welcomed. Your proposal to make everyone else have a degree and perhaps level 6 are crazy.
“There is no degree in NZ for life insurance, or mortgage broking, or investment advice, or general insurance advice, or trustee services advice So the degree being talked about is not a vocational degree like lawyers, accountants doctors dentists engineers surveyors et al are required to hold to get recognised in their respective professions.
“Talk about a degree sounds fine and dandy – in Australia advisers will need one, but they do have degree programmes that cover the financial advice disciplines. Are you seriously saying our 'mom and pop' 'kitchen table' insurance agent needs a degree? Baloney.”
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Comments from our readers
Raises a question;
Does SiFA ever get contacted by officials when they make such statements, which oppose the proposals to such an extent?
My thoughts exactly as I was typing out my comment above.
My guess is the CEO of PAA is not wanting to rock the boat, as he has a job interview with Financial Advice next week I understand, but I would think on his very large current remuneration package with PAA, he would be doing something for the benefit of members before he abandons ship !
I have been involved continuously as a SIFA advocate on regulatory matters since 2007. {I've seen a few generations of officials over that time I must say; and Ministers too - Dalziel, Power, Foss, Goldsmith, Deans and now Faafoi)
SIFA has written a fair number of submissions over that time and have often been critical of what has been proposed.
I cannot remember the 2nd time any official from any Government Dept or Government Agency initiated any meeting with us or even sought any clarification from us about anything we had said in any of those submissions.
[Frankly I don't know what the first one would have been either but I don't want to be called a liar and have my credibility attacked because someone can recall having done so once in the past.]
One explanation for that is that could be our submissions have always been written in such blunt fashion and with such clarity that there is never any doubt as to what we are submitting.
There are of course other reasons but as Sir Humphrey or his apprentice Bernard would say "I possibly couldn't comment..."
On your other question and Brent's followup, you are publicly asking what we have been privately asking (and sometimes publicly goading) for some time.
One excuse I can think of is that they are so busy sorting out their internal organisational merger that they can't spend much time on the things that are going to affect their would-be members for the next decade.
For example, I don't for one minute believe that PAA (or F**Z) could be in favour of current RFAs needing a degree and Level 6 going forward.
I think they should be shouting from the rooftops that most of their life insurance and mortgage broker members would be treated as "financial planners" under the proposed CWG scheme (not as "product advisers") and incite them to action.
But if I am wrong and PAA (or F**Z) really do believe a degree is the right level, why aren't they telling their members that? And why aren't they agitating against the free pass for AFAs?
First, any AFA could have told the FMA where to make their first visits - to advisers who pass clients funds through their accounts - like David Ross !
If they had asked us advisers where the risks lay at the outset, just maybe they would have got to Mr Ross before it was too late!!
Then we see a recently retired minister of commerce (aka regulator) MP become head of wealth at a big BEOT!! Is that how we want NZ to be run ? Jobs for the boys at the top ? As Peanuts would say, bleeeaaahh !
They say they want mums and dads to get good advice, but they hamstring us with paperwork like ABS, AML, and a dozen other pointless impositions
Then in 2013 they “appoint” us as money laundering “detectives” with the threat of huge fines if we don’t do it right – but no money launderer will come near us, as we, in doing our job, ask too many questions
Meanwhile car dealers, real estate agents, and lawyers kept taking buckets of cash - for a further 3 or 4 years – while we struggle under a paper load, and extra costs.
Why were we first? we are in low AML risk business.
Then Mr Everitt says commissions make crooks out of us. (I don’t take commissions ) But rubbish, there will always be a few unethical people in every industry who don’t have good values, and/ or are just plain greedy
But most of us, in all profession and jobs, are OK and trying to do a good job
Now we have another farce - the composition of the CWG ! Again, not an adviser in sight, and SIFA have correctly pointed out what a muddle their proposals are
I could write a lot more, but don’t have time
I have to update my ABS, AML, CFT, Disclosures One and Two, my FSCL file, get some CPD’s, keep up to date with investment markets, and somehow fit the occasional client in
And oh, I nearly forgot, try and make a living too, since I don’t get a fixed salary.
Baloney does seem like the right word.
Someone whose opinion I respect has told me we should stop hammering on about some of the issues we are because"the CWG has already accepted some of them"
Which ones have been accepted my subject didn't elaborate on.
My subject is in the private sector and is not on the CWG. She/he is not associated as far as I know with any organisation who has an executive on the CWG. But she/he is usually well informed
I'm envious that she/he appears to have better sources than we do. But that is not the point.
If my subject is correct, and CWG has actually changed its mind already on one or more issues in the consultation, wouldn't the transparent action be to announce that fact, so that submitters don't waste any time in submitting about things that are no longer on the table.
So my open question to CWG is to ask simply "are there any matters in the Consultation Paper on which CWG's view has changed since the release of the paper."
Perhaps GR could consider asking the question as members of the legitimate media.
PS on a lighter and completely unassociated note and to show how absurd PCness has become, I recently had to complete a Government official entitlement application form the other day - the question on my sex offered 3 options - male, female and indeterminate!
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