The Professional Advisers Association (PAA) sat down with PAA Board Member Angus Dale-Jones in early November to hear what advisers should look out for over the next six months and why it’s time to ramp up their engagement.
Five years ago, the Financial Advisers Act (FAA) was the new kid in town, with room for improvement. Now, that opportunity for change has arrived.
In the coming weeks, the PAA will be consulting with other associations and with advisers on the Options Paper released today. Now is the time for advisers to share their views and turn up the volume.
The role of advisers in shaping change and the FAA Review has been a key topic of conversation this year. In early November we spoke to PAA Board Member, Angus Dale-Jones about working with the regulator and the importance of the next six months – when possibilities become probabilities.
PAA: Managing change is a process. Do you think the advice community is in a better position to achieve meaningful understanding with the regulator now?
In terms of whether the regulator’s door is open, yes. This has been one of the most modified pieces of legislation in the years since it was passed through Parliament in 2008. For several years now we've been having regular Quarterly meetings with the regulator and based on our input, when appropriate, the FMA has tailored what they require from advisers.
With regards to the review of the FAA, there has been a big, big step forward in the last five years, on a number of levels. First, the professional associations are working in concert far better than they were five years ago, and that unified voice makes it much easier to put the case for financial advisers and for consumers. Secondly, we have three players on the regulatory side of the fence – MBIE, the FMA and the Code Committee - who are very positively disposed towards listening to the industry and the profession to get practical ideas about how to make this legislation work better for advisers and consumers.
PAA: In your view, what is the key benefit of associations working together?
It's all about the theme of reducing confusion. People are confused about the difference between RFAs, AFAs and QFE advisers; they are confused about personalised advice and class advice; they are confused about wholesale or retail clients; they are confused about the myriad of documentation.
Similarly, they are confused about different adviser associations, especially when the different associations say different things. The theme throughout is to simplify and reduce confusion, which will help engage consumers about the benefit of financial advice. We've got to play our part in that by unifying our voice and our message.
PAA: You’ve spoken about the inevitability of change. Do you think this can be a barrier to adviser involvement in the review process?
I think there is a risk of advisers assuming they cannot influence change – the view that something bigger than me will change, take me along for the ride, and there is nothing I can do about it. If there is one message I would like to convey to advisers, it is that this is not the case. Please have your say on the Options Paper when it is published.
Yes, we have evolved into a more regulated world, not just in New Zealand, but internationally. There are changes in terms of the standards expected from advisers, their original training, their ongoing competence in CPD, their ethical standards and their conduct standards. International expectations have changed and continue to change. Now, we could argue about whether that's a good or bad thing, but in effect, it's inevitable. If we want consumers to have faith in person-to-person financial advice, we have to move with that inevitability, and collectively shape the nature of that change.
What professional associations can do - when supported by adviser feedback, views and concerns - is represent advisers in that change-process. Although some changes might be not particularly palatable, we need ensure they are made in a way that takes the interests of financial advisers into account. To support this, it is vital that advisers take an active interest in the review of the FAA – it will have a profound impact on the rest of their careers.
PAA: What are the next steps?
First of all, it is important to note that the Options Paper is simply the next step in the journey. In the Options Paper, MBIE will go beyond issues and crystallize their thinking into options for how the law might change. It is far from the final outcome, and is really just a more focused way of provoking discussion on some possibilities. Any adviser whose summer reading doesn't include the Options Paper will miss a golden opportunity.
The next six months is critical and we – the PAA and other associations – will formulate our view on the possibilities presented and argue our points in the interests of consumers and advisers. We have confidence that based on the level of engagement with the regulator to date, we'll get to a good place for consumers and advisers.
PAA: So time to ramp up the level of engagement from advisers?
Without the adviser voice, we are less able to modify our position in terms of what changes might happen or what the transition process towards those changes might be. In short, it means that we can't argue a full position and that is to the detriment of advisers and consumers.
If you take the view – as we do – that in serving the interests of consumers, we will drive a better future for advisers, it is essential that we understand what needs to change from the consumers perspective. Advisers are closer to consumers than virtually anybody else - definitely closer than product providers - and therefore their views are critical in achieving this. As an association squarely at table in this process, if we are able to hear about advisers’ experiences with their clients, we are better placed than most to put forward advisers’ views as well as those of clients.
Please note the above is not commentary on the Options paper released today. The PAA will provide their commentary in the next week.