Regulator's forums on FAA Review options a success

by Maya Breen17 Feb 2016
Three forums were recently hosted by the Financial Markets Authority (FMA) with the Ministry of Business, Innovation and Employment (MBIE) to discuss options with industry members for improving the operation of the Financial Advisers Act 2008 and the Financial Service Providers (Registration and Dispute Resolution) Act 2008.

The booked-out forums were held over a day each in Auckland, Wellington and Christchurch last week and yesterday. 

Representatives from all the adviser associations were in attendance and The Professional Advisers Association’s CEO Rod Severn told NZ Adviser it was good to see the associations continue to put their viewpoint forward as they have been throughout the Review process. 

“I commend MBIE and the FMA for their openness and their willingness to want to discuss all this as often as possible,” Severn says of the regulator hosting the forums. 

“There is still a very clear direction in that they want to simplify the Act as best they can. We are trying hard to find ways to reduce costs for the adviser, particularly the AFAs. 

“MBIE are genuinely listening to some of the concerns and I think they’ve certainly picked up on a number of them and then we’ll see those changes happen. I think there is going to be some good outcomes.”

He says if the changes come to fruition it will be beneficial to all those in the industry from consumers and advisers to the regulator and product providers. 

“The good thing that came out of (the forum) was the fact that it showed that there is still a massive amount of detail to drag out of this before MBIE really have a position to fulfil the paper (to the Minister).”

Three two-hour long sessions were held each day with about forty in attendance per session. The groups were then split into four teams for discussion on s given a topic where differing viewpoints abounded from varied attendees including product providers, advisers and lawyers. 

One point of discussion was the difference between sales and advice, Severn told NZ Adviser

“What I would like to see is a really clear definition or delineation between sales and advice.

“The FAA is really for advisers and only advisers. If you’re a sales person you fall under the Financial Services Conduct Act - you don’t fall under the FAA at all,” said Severn. 

“(Advisers) have a much tighter and more defined Act and the adviser actually becomes quite an exclusive character in the whole scheme of things.”

He said no concerns were raised at the forums which hadn’t been voiced already, which was a good sign.

“Nothing has come out of left field that we didn’t already know about, which is good … everything is open for discussion.”

The last day for final submissions on the Options paper is next Friday 26 February 2016.


  • by Giles Thorman 17/02/2016 12:31:13 p.m.

    I thought the "delineation" between sales and Advice were covered under the existing Act/Rules?

    A client can instruct you to carry out a specific task where No Advice is sought, the client then signs a contract that clearly acknowledged they have not sought advice. Excessive use of this "Contracting Out" or "Sales Only" should be investigated as it would seem to infer the Person was trying to shirk their responsibilities to ADVISE their clients or the General Public.

    The concern I have here is that now there seems to be an undercurrent push to allow for more "Sales Only" and effectively enable people to contract out of their responsibilities. By any chance would this be aimed at Bank Staff engaged in Insurance Sales; or am I just being needlessly suspicious??

  • by DH 17/02/2016 2:40:51 p.m.

    You're right, Giles. Though on reflection I don't think this is a bad thing at all. Right now people are making no-advice purchases while experiencing, in their own thoughts, an advised sale. Right now there is no CLEAR distinction between Sales, and Advice, until, given the chance, a proper adviser explains it. In other words, one side has avoided their responsibilities, while the other thinks they haven't. What is likely is a distinction between advice and sales, which will end up being similar to the intended-but-completely-failed attempt at creating a distinction between AFA and rbnAFA (colloquially called RFA). There, the envisaged "premiere" status AFA was meant to carry some kind of mana that an rbnAFA could only aspire to, and was sought out by the public, after they had been educated to appreciate the difference.

    We all know what the feeble attempt at education looked like - a short-lived cowboys ad.

    Right now the carve-outs for QFE "advice" are far, far too generous. Any (real) ADVISER will have a story of what it feels like to compete with someone operating on a totally different level in terms of product comparison, disclosure, research, needs analysis, advice statements and replacement business advice forms. Because in reality, one really is an ADVISER, and the other, quite frankly, is totally not.

    As uncomfortable as some may be with it (namely, those end up labelled as such), Sales, which is an appropriate euphemism for 'product pusher', single-provider, or on-a-salary-but-must-meet-tough-targets, is a distinction that should find a place in the revised regulations.

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