The Institute of Finance Professionals New Zealand says in its submission that the use of the term Registered Financial Adviser (RFA) is “damaging for New Zealand's reputation as a responsible member of the world financial community and for the reputation of the regulator system at home."
Using the term RFA opens the door to ‘unscrupulous or careless’ international financial service providers to benefit under the term as well as the apparent supervision of the FMA to sell their services, generally to offshore customers, the submission explains.
It goes on to say one of the three major issues is, “The status of the people who have registered on the Register of Financial Service Providers and use of the term ‘Registered Financial Advisers’ (RFA) to describe them. Particularly, the confusion this creates in the minds of NZ investors and the reputational risk this creates from unscrupulous offshore service providers.”
IFPNZ executive director Jim McElwain told NZ Adviser
categorising advisers into RFAs and AFAs adds to the confusion of what an adviser does to the consumer.
“I think there is confusion held by consumers who don’t understand what the differences are between a registered financial adviser and an authorised financial adviser and so that defeats the purpose in the sense of the distinction.”
“Greater clarity, whereby consumers clearly understand the role of and position of the people that are advising would add to confidence in the markets.”
The IFPNZ have put forward a number of steps to clear confusion including amending the Acts to prohibit the term RFA and for the Ministry of Business, Innovation and Employment and the Financial Markets Authority
to swap the term RFA for an alternative such as non-authorised financial adviser.
McElwain says the consumer needs to have a clear understanding of whether the adviser is a product sales person or their own personal adviser.
“Are they selling products and services as that’s their job as a salesperson or are they their personal financial adviser and therefore owe a duty of care to them as the consumer?”
“I think the role of financial planners is a very important one and in the industry it’s very important that there’s confidence and the profession is seen as one - I think greater clarity around RFA and AFA will contribute to that, so I think that is an important development.”