[GRTV] Financial advice transformed my life: Shanks

Financial Advice New Zealand chief executive Katrina Shanks says getting her own financial adviser has transformed her life.

Monday, October 12th 2020, 11:36AM

Good Returns: Back in the studio. We have Katrina Shanks, the chief executive of Financial Advice New Zealand. Welcome back, Katrina.

Katrina Shanks:Thank you for having me.

Yeah. Last time you were here, you were quite new on the job, but now you've seen a lot of the financial advice sector and I read somewhere that you've actually got your own financial advisor now. How's that process been?

I do have my own financial advisor who's totally transformed my life.

Yeah?

So, yep, it's been a great experience and once again, I hadn't had financial advice before I took this role and I thought it was really important that I understood what that looked like.

So, why hadn't you done it beforehand?

I don't know. I think like most people, I think I'm pretty competent. I'm a charge accountant by trade. I understand business and I understand my own finances and I know how to read a contract. So, I thought I didn't need it, but actually now that I've had advice, I realized just how invaluable it is and how it gives you a different lens of looking at things and it's totally transformed my life.

So, is that the story you're going to take out into a more public way?

So, a couple of weeks ago, it did go a little bit more public when we wrote about that journey. I wrote about it in an opinion piece in Stuff and had a lot of feedback from that I've got to say, but absolutely everywhere I go I talk about this journey of seeking financial advice and how it can change your life because I truly believe it does. And that's what we're here for at Financial Advice New Zealand and that's what financial advisors do every single day. They help people to increase their financial health, wealth and well-being.

So, the other day you were saying to me, and good on you for doing that, but the other day you were saying to me that you've been surprised at how resilient the financial advice seeker is because it's gone through so much change. Can you sort of tell me a bit about what you've seen there?

Well, huge change, not just through the legislation. So, obviously, we had FSLA come through, which has set the environment, which FAPs are going to operate in the future. So, that's getting your mind around what does the license look like? What do my liabilities look like? Not only as my company, but also myself, because you've got duties under both. So, that's been quite a journey.
And then on the top of that, you've got the disclosure requirements, you've got full licensing coming in, and then also we've had environmental change with how the different dealer groups and aggregators have looked to add value to the process as well, which they do. And then on top of that, we've had COFI come in for conduct and culture for product providers and companies and their reaction to what that looks like as well has changed the environment slightly. So, just as you think that the environment has settled, there's another change that's come in to the environment.

So, do you think financial advisors have faced far more change than other professions?

I think so. I was reflecting on this a few weeks ago and I can't think of any other sector which has gone through change so quickly over such a short period of time. And it's been significant change, but not just change from legislation, change from their commercial agreements and the environment they work in and the market as well. So, the only thing that's really constant is the good advice that they give every single day.

Interesting. Is it? Yeah.

Totally.

And turning to some work being done by your organization, Financial Advice New Zealand, the trusted advisor. So, that was something which got talked about right at the formation of the association. Now, we've nearly called it a shorter name.

Don't do that.

No. I won't. So, why has it taken so long to get there and how difficult has it been to put together?

So, obviously, when the three organizations came together they wanted to develop a quality mark and that's actually in our constitution that it was to be developed. And so, that was one of the briefs I had when I first came in and that's been two years in the making because the environment has been changing so much and it's really understanding where the legislation and the regulation was going to sit. So, what does that base level of compliance look like? Then understanding the different values which were coming out through the dealer groups and aggregators and the conduct and culture coming through as well, where that was all going to land? That's taken a while to land in a certain place. So, now that we understand what the environment is looking, it was much easier to create the quality mark which means something. It means something not just to advisors, but also to consumers.

So, one of the questions which I wonder about, so if you're going to advise one of your members out there and they're using this quality mark and something goes wrong, how are you going to manage that?

Like every process, we'll have a process in place, which will say there are certain things that we expect of you as a member, there are certain things that you have to have in place to have the trusted advisor mark. So, there are five criteria that we've gotten there and that's experience, qualification, ethics, PI, and there's one more, which is-

PI, Ethics, 20 hours CPD.

CPD. 20 hours. Thank you for that help. Yeah. So, there are those components, which are the criteria to get it. But once again, it is all about conduct and culture and it's all about being professional. And our membership have already got rules around that.

Will there be some sort of disciplinary process in there if something goes wrong?

We do have that anyway and as a member you have to act with integrity and we have all the criteria in our membership as it is. This is just a mark that stands a little bit beyond the membership to say, I am committed to my profession and I'm going to do these things to show that commitment for this mark.

So, what percentage of your members do you think will go for a trusted advisor status?

Well, we think quite a few. There'll be some that will already be eligible for that.

So, people with the-

CFP, CLUs, for example who-

So, will they get it automatically?

We're considering that. That's part of the consultation process. So, obviously, there'll be some that already make that mark. AFAs mainly will meet that mark as well, maybe apart from the ethics component. So, there'll be some which will already meet that mark. And so, this consultation period is about teasing that out. And should we allow people in straightaway or should we let the process just go slowly and you apply for it?

So, and the consultation, has it been all quite similar or are you getting lots of variations in there?

Yeah, we've had fantastic feedback actually. So, it's been a really ... And it was really genuine consultation as well. We really want to hear what the membership think about this and also the other stakeholders out there, what they think about the mark and where it's landed. And it's been overwhelmingly supportive of it. There has been feedback around should somebody be grandparented in, should we be looking at longer three instead of five, five instead of three years of experience? Should it be qualification based? Should it be a higher qualification? So, we've had lots of different feedback, but overall, really supportive of where we've landed with the trusted advisor.

So, you think most of them will go into this, or?

I think there'll be a majority of members that'll look to meet the criteria, but it's a journey. And for those which don't quite meet the criteria, for example, haven't got three years of experience, they haven't quite got their qualification yet, we think it's really obtainable for financial advisors to get this mark.

So, do you think it'll be different between the insurance and mortgages and the investment space or similar?

Well, with the new legislation, we're all similar and we're all the same and we all give regulated financial advice. So, we're all on the same journey together and I think what the government has done with the legislation, as they're saying, we expect anybody that gives financial advice to be a professional. So, that is the indication which the government has thrown through this legislation that we expect people to be professional. And also in the licensing conditions, they're showing levels of professionalism for the businesses as well. What does professional business look like? So, that's certainly where the government is going and I think it's certainly what the consumer expectation is that when they deal with a financial advisor, they get a professional service and absolutely most advisors will really do that.

Yeah. And how are you going with membership numbers?

They're pretty static. So, we're in renewals at the moment and looking really positive. So, we're really pleased.

Yeah. Good. And lastly, we've just touched on COFI, the conduct legislation. You're supportive of it, but you've got a few areas that you'd like to see some changes. What are they?

Yeah, absolutely. So, we're all for good conduct. Absolutely, of course we are as everybody else is in the sector. So, really it's about understanding the powers which have been given through regulation for licensing on renumeration. We think those powers are too wide and too far reaching. I can't think of any other industry where your renumeration is set in licensing conditions. So, we think that reach has been most probably a little bit too far. We've got concerns about FAPs have been excluded from this legislation, but individual advisors haven't. So, but we think that's just drafting error. So, we'd like to see that being fixed in the drafting and explicitly excluding financial advisors from that legislation, I think is really important as well.

Do you think it will get through before the election?

No.

No. So, long way to go?

Long way to go yet. And I think everybody's focused on getting some of the other legislation through. And I think this legislation and everybody that submitted had the same message, was that it needs a lot more work.

Yeah.

And we know the officials who-

Because it does feel as though it's being rushed, doesn't it?

And for the cycle of a piece of legislation, it has absolutely been rushed and the officials have worked really hard to get what they've got in place and to select committees. So, I appreciate the work and the hours they've put in because they absolutely have, but I think it was fairly rushed and I think good legislation comes from good consultation.

Yeah. Well, an ex MP, you'll know these things.

Indeed. I do know what rush legislation looks like and normally it's not that hot. Yeah.

Yeah. Cool. Anyway, well, we'll leave it at that. We've run out of time. Thank you very much for coming in again and lovely to see you.

Thanks for having me.