Newpark hits out at regulatory confusion
Newpark Financial Services has hit out at the ongoing confusion around the new regulatory regime, and has warned the new environment could heap too much liability onto adviser groups.
Friday, September 27th 2019, 9:44AM 
3 Comments
Melanie Purdey, chief executive of Newpark, is concerned about the lack of clarity between lenders, groups and advisers around the forthcoming new regulation.
She believes BNZ's position – working only with groups who take financial advice provider status – could lead to liability issues for adviser groups.
Purdey believes forcing groups to take a FAP licence and total liability for members shifts an unfair amount of liability onto head groups.
She told TMM Online: "We are stuck in the middle. There seems to be a distraction around liability. The bank is saying 'we won't be liable, you be liable'. Advisers are saying, 'cool, ok, you be liable, and we don't have any responsibility for it either'. As a group, we have the least amount of control over the advice that goes to the client."
She does not think that forcing advisers to work under their head group's FAP will lead to the "best client outcomes".
"I feel like this is not the intent of the legislative regime they are trying to deliver. They are trying to deliver good client outcomes, and I don't understand how this structure creates better outcomes. You want adviser businesses to be responsible for outcomes, and understanding their liability.
"Why is liability channelled to intermediary dealer groups? We are a link in the chain we provide a service to our members, not advice to clients. I struggle with the rationale," she added. "We are not being paid by the banks, but are being asked to assume the liability. It's an untenable position."
Newpark has raised doubts that head groups may not be legally entitled to become FAPs under the new regime. Regulation stipulates that FAPs must provide financial advice and have clients, Purdey says, meaning groups will not technically qualify. Newpark has sought legal advice on the issue.
"As we understand it under 431D we do not qualify as a FAP as we do not have clients to whom we provide advice."
The company has expressed its concerns to regulators. Nevertheless, Newpark says it is "FAP ready" but "do not want to go there until we know for sure".
In speaking out, Newpark wants lenders and other groups to discuss the issue further.
"We've always been proactive in terms of starting the conversation," Purdey says. "We do not have enough answers at this stage, and we want answers before we put our stake in the ground. We have to fight the good fight."
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Comments from our readers
The comment on 431D is exactly where this discussion needs to focus on. As an adviser intending to take a license, 431D is but a section to glance at. Because I am an adviser, I have clients and I give advice.
Many have stated that it's semantics, and others have said take on FA's directly and that solves it, but does it? There are other issues in question that need discussion.
We get the liability rests with the FAP, the FA concerned has some implications too, but the FAP is the one on the line. The question that prevails is who owns the client, and thus who owns the remuneration. If it is the FAP and not the FA, then meany advisers are going to be deeply concerned about that.
Lets put what we have going on in simple terms most will understand.
You have a computer (the hardware, or the box)
You have an Office CD so you can install Word & Excel
But your computer doesn't have Windows installed yet, and you don't have a disc for it.
The Windows bit is clause 431D... Without the basic operating system in place, you can't proceed to the more advanced bit of installing office and using your software.
The same applies here if you are not a financial service provider who is providing financial advice to your own clients or you are not contracting someone to provide financial advice to your own clients, you don't qualify to be a FAP. Key points, Financial Advice & Your Own Clients.
That's what the law says, it is written in black and white.
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