Code of Conduct and CWG submissions

We now have The Code of conduct for us released for feedback, and feedback you need to provide. Take the time and respond.

Friday, October 26th 2018, 8:00AM

For most RFA’s, I'm going to punt, they have not read the existing AFA Code in detail and many won't have read the FSLAB legislation and cross-compared everything in detail.

What may not be understood by those that are commenting 'Hooray, we have a code and it's fine and looks good', is there's been things moved. Things that sit under the AFA code that have been moved into the FSLAB legislation.

One that isn't covered in The Code is nature and scope of services as we have with the AFA Code, as this is now part of FSLAB.

What this does is elevate this to a higher requirement for defining what you are doing, also what you are not doing. However, you are not able to scope out of giving advice.

The reality for many advisers, who are more at the sales end of the spectrum, this creates a level of requirement that is quite different from their current operating model.

On Friday the 19th I attended a meeting with MP Kris Faafoi. There was representation from Mortgage, General and three Financial Planners, one with DIMS and myself for Life. As well as CWG and FMA representation.

On the whole, I was pleased with the meeting, outcome-wise let’s see where the minister goes with this. Overall I had the impression things were on the right track, with MP Faafoi taking the seat of the consumer in his perspective.

There was a discussion around qualifications, and while The Code isn't the full rulebook, it does set the minimum bar for qualification competency. However, there's more needed in this area about what maintaining competency is going to look like.

We need to keep in mind that The Code is just one part of the puzzle. MBIE is managing disclosure, the FMA is to cover licensing, which is yet to have any clarity, and then we have FSALB over the top.

I also tabled the privacy issue that the MP directed at the life industry, in which a current Privacy Commissioner directive is preventing the life industry complying with the MP’s requirements. For the industry to meet the MP's requirements, this needs changing to enable insurers to request the required information.

The CWG commentary was; the feedback to date on The Code covered the right intent, while some wordings needed tweaking.

One of the things to be aware of, there is quite a bit of noise from financial planners about lifting the qualification requirements for financial planning services.

There is broad agreement here, and overseas, that there is a higher education need for the more complex situations. The Code is the setting of the bar as the minimum requirements to play, which I think is getting a little lost in the discussion.

The new code separates financial planning in The Code, allowing the investment space to be reviewed in the future without the need to review the whole code.

Which gives comfort to those not in this space that they won’t have the rug pulled with an extensive change of the education code standard which is directed to other areas of the industry.

However, that's not to say a review of The Code standard relating to us won't be reviewed, or revised into further sections in the future.

The area where we may see further increases to this is in the specific licensing requirements required by the FMA, which the FMA still needs to clarify.

What this does highlight is competency in a particular stream is the requirement. Maintaining that competency is whatever is required to do that. So there isn't a prescriptive CPD requirement.

It will be up to the FA and FAP to determine that they are meeting and maintaining the competency level required. Tenure in the industry is not a measure of competency; however, there are pathways to turn the experience into relevant qualifications. At the end of the day, it's probably easier to do the Level 5 qualification.

An area that I'm yet to have clarity on is how the current RFA KiwiSaver advice process is going to be managed going forward. The FMA is keen to see the RFA 'class' advice approach continue; they directed the banks to lift their game and use it in a directive. This is a watch this space point for me.

Circling back to the Nominated Rep (NR). Under the Law, the NR is not responsible, the FA and FAP around them are. So the qualification piece is the responsibility of the FAP, not the FMA or The Code.

If the FAP wants the NR to do complicated things, then the FAP needs to be able to demonstrate that the NR is meeting the requirements with the combination of in-house training, systems, processes and supervision.

The reality is anything too complicated the FAP is going to find it far easier to have a qualified FA do the job than manage the risk of the NR doing it. I don’t think this is well understood nor appreciated by the wider adviser community.

What we may see, as things develop with licensing, is a higher level of education required for aspects of what we do. Not that this has been signalled, more this needs to be kept in mind once things settle in and shake out post licensing.

On the life side, there is going to be change, managing the balance is the key, not enough change won't meet the requirement of the change, and too drastic, we have people leave the industry in droves.

Which is one of the concerns MP Faafoi expressed, the desire to lift standards but not drive people out of the industry.

Tags: Jon-Paul Hale