High compliance among AFAs: FMA report

by Maya Breen18 Nov 2015
The Financial Markets Authority released their annual Sales and Advice Report yesterday and noted that compliance levels among Authorised Financial Advisers are very high.

“The vast majority of AFAs take their obligations seriously, and we are committed to supporting these advisers. In the small number of cases where we do not see a willingness to comply, we are taking this seriously,” the report stated, noting only two AFAs were currently being referred to the Financial Advisers Disciplinary Committee. 

The FMA report looked into four key areas of these obligations for AFAs including behaving professionally, ensuring clients can make informed decisions about using an AFA, ensuring clients can make informed decisions about personalised services and keeping information about personalised services.

AFA Geoff Goldsworthy of Goldsworthy Financial Solutions told NZ Adviser they chose to be an authorised adviser because that’s what their clients wanted when they put the question to them some time ago.

“Clients want good advice - we’re here to give good advice and we’re just doing our darndest to meet the requirements as the regulator wants, without overburdening the client in a whole lot of paper that they really don’t want to understand,” says Goldsworthy.

“The compliance component does have a distinct impression on the business moving forward – our support staff has increased just so we can do the same stuff - so that’s not going to get any easier, that’s just something we have to move towards.”

He says the introduction of the AFA and RFA distinction led to many advisers walking away from investment advice to make things easier. 

“I think the classifications we’ve got now have been designed by the regulator to manage the industry,” Goldsworthy says, rather than with the view of making it easier for the client to understand. 

The revised Code of Professional Conduct for AFAs came into effect in May 2014 with RFAs and QFE advisers not subject to the code. 

But Global Financial Services director and RFA Ajay Kumar told NZ Adviser the intention and attitude of a financial adviser to serve its customers is more important than their designation.

“My view is designation is not the only important aspect. In fact the FMA is closely monitoring AFAs but not others such as RFA or QFE. Thousands of RFA and QFE s are also doing a great job,” says Kumar. 

He says the majority of customers are served by RFAs and QFEs with AFAs serving a minority of the total market. 

“Therefore by and large the industry is doing well and there are less complaints from customers. Becoming an AFA does not mean that we will be more responsible. If they are an RFA, it doesn’t mean that they are less responsible. When there was no distinction such as AFA, RFA or QFE, most of the financial advisers were still doing a great job.”

Goldsworthy says that as a rule, the industry itself is very professional. 

“A huge majority of advisers want to do their job well - they want to be recognised as being professionals and they want to be appreciated by the people they deal with,” he says and that no matter what type of adviser they are, everyone has a genuine desire to do the job very well.

“At the end of the day, clients want to talk to people that give them good, straight forward advice and the huge overwhelming majority of advisers are good, professional honest people who want to give good genuine advice.”

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