Apprenticeship model possible under new regime
Businesses will have more ways to train new advisers into the business under the new advice regime for financial advisers, the chairman of the working group developing the code of conduct says.
Wednesday, November 21st 2018, 6:00AM 
8 Comments
Angus Dale-Jones said the new structure, with all financial advice providers able to hire nominated representatives, would offer more flexibility.
“The regime itself is designed to be flexible and allows for the full range of business models and situations and that flexibility of the code and the regime extends to training.”
Under the new regime, a licensed financial advice provider firm can employ a nominated representative who does not have the qualifications required of a financial adviser.
That person can then dabble in advice-giving, provided the provider has the systems and processes to “backfill” any gaps in their knowledge for the service they provide.
At the moment, only QFEs can operate this sort of structure.
Dale-Jones said all the existing ways that people trained advice staff could still be used under the new regime but there would be a further step that would allow an apprenticeship-style system.
“That is allowing nominated representatives to do some discrete parts of advice-giving while they are still training. I don’t think that’s something lots and lots of people will do but for people on a pathway to becoming advisers where businesses want to give them the opportunity to work in discrete advice-giving, then it’s an option for them to do it as nominated representatives.
"That would have to be permitted by the licenses with the finical advice provider. Financial advice providers have to have processes and controls around that to make sure the advice given is at the appropriate level. It’s not something you can do without thinking through the consequences but it’s an additional mechanism, an additional piece of flexibility around training that in the current regime only exists within a QFE.”
He said the working group was still going through the submissions it had received to its draft code.
“That will be subject to any updating and further targeted consultation we might decide is necessary over the next month or two.”
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Comments from our readers
Clearly that would be illogical. There must be a mistake in the draft Code.
Perhaps it was just a 'try-on' from Bank reps to the less experienced members of the Code Committee.
Parse the actual text and see if you come to a different conclusion to me:
Nominated representatives
[1] complete the learning outcomes specified for their role by their financial advice provider
[2] that mean that,
[3] together with the procedures, systems and expertise of the financial advice provider,
[4] the nominated representative has the capabilities equivalent to those of an individual who alone has achieved the general qualification outcomes.
I do not believe that the issue is with Nominated Reps (together with the procedures, systems and expertise of the financial advice provider) being deemed to have equivalent capabilities – the issue in allowing Nominated Reps this scope is that the FAP has the appropriate governance, and more so, that the regulator has the band-with and teeth to suitably monitor and enforce good advice outcomes.
The approach doesn’t seem unreasonable given a key driver of the changes is to make financial advice accessible to the masses, not just the few that can afford it and/or see value in it, i.e. how freely available are your services to prospective clients with less than $X amount to invest?
I believe one survey suggest people are willing to pay $40 – that doesn’t make a strong business case, and in turn, doesn’t make advice available to those who arguably need it most. Like it or lump it, VIO’s can make advice accessible that other parts of our industry cannot do in any commercial way.
I’m also of the general view that when many individuals engage in a conversation about a financial product or investment planning their perception (regardless of any scope agreed and clearly articulated) is often that the advice is personalised to their circumstance so it seems intuitive to set the bar based on a good advice outcome regardless of channel – the people and/or organisations providing the individual or collective advice outcome just need to be held to account.
It is a case of the code being the minimum bar, and frankly who really wants to aim at the minimum bar?
NR's have a haven to play as they develop, the FAP is going to find that the complexity of advice delivered by NR will need more sophisticated support to ensure they are delivering at the standard needed.
Especially when the CWG get around to lifting the investment bar to level 7...
The FAP's will find to a level NR's will be able to operate, above that they need to be FA's as being an NR is too difficult to comply.
This, of course, is completely dependant on the licensing rules the FMA come up with and how they intend to, and actually do, regulate the licensing.
But you haven't realised at that point that the nominated rep ill still be deemed to be equivalently qualified to the financial because
(a) the NR will have undertaken the study as determined by their FAP; and
(b) the FAP will have processes systems and expertise.
i.e plus ca change plus c'est la meme chose.
The VIOs don't even need to advocate for their own benefit when there are advisers who are doing that for them.
The CWG has expressed an intent to address the concerns of the CFP community by lifting qualification requirements for investment advice and planning, once everyone in the industry is at least at level 5, FAP/FA.
The second piece to this is a NR giving advice needs to be doing so at the level 5 level. Frankly as a minimum bar for the first cut, isn't a particularly difficult thing to achieve.
However the onus for this meeting the standard falls on the FAP, so the more complex the advice, the more they will need to demonstrate they are meeting the standard.
This will require better governance and systems for many. However, VIO or not, for the first time in a long time we have the same rules for all, and that is more advantageous right now.
What ever the bar gets set to, level 5 or K, it means little if the regulator doesn't police it. Which is more the piece that needs clarification.
What does the licensing look like?
How is the FMA going to manage it?
And more importantly how stringent are they going to be?
Because at the end of the day it’s how the rules are managed that will make the difference.
The harsh reality, going by the way NZ operates, we’re going to have some great laws and rules, but very little resource or appetite to enforce them.
There are many thing that shouldn't be happening, but they do. It's not until there is significant quantified harm that officials act, and usually with a wet bus ticket.
Speaking of bus tickets, this is demonstrated daily in Auckland with people driving down bus lanes on the motorway. They aren't under AT jurisdiction, so AT doesn't care, and the Police are too busy with other stuff to care about something considered minor.
Sort of my point here. We can be up in arms about the detail on the minor end of things, the reality in practice is going to mean very little.
Cynical maybe, but been around long enough to see how this is likely to play out.
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To repeat what I have said before, not opposed to apprentices; but seriously opposed to apprentices being considered by the regulations to be the same as tradespersons.