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New regime for financial advisers starts: here's the detail and how it works

New regime for financial advisers starts: here's the detail and how it works

Here's today's details from the Commissioner for Financial Advisers.

The new regulatory regime for financial advisers begins today, with the first Authorised Financial Advisers receiving their certificates of authorisation at a ceremony in Auckland from Commissioner for Financial Advisers, David Mayhew.

The regulatory regime will be phased in between today and 1 July 2011.

David Mayhew congratulated the new Authorised Financial Advisers (AFAs) for their commitment to professionalism in being the first to qualify.

“These first AFAs are to be commended for preparing for the new regime so promptly. They’ve shown the kind of professional responsibility that the new regime is designed to promote among all financial advisers,” he said.

David Mayhew notes that from today all financial advisers have a statutory obligation to act with care, diligence and skill.

“That gives the investing public greater legal recourse in the event that things go wrong. But the advisers who have qualified as AFAs have gone further.

“If you’re a retail client dealing with an AFA you’ll know they’re qualified to provide investment advice, they’ll be disclosing how they’re paid and they are required to put your interests first and to provide plain English investment advice for your personal situation,” he said.

Ten advisers have so far qualified as AFAs around the country.

Some 4,000 advisers have taken the first step in the process by registering for qualifications, and 2,128 have booked examination dates for the core exam for AFAs. Advisers also need to gather testimonials and develop comprehensive business statements.

David Mayhew urged advisers wishing to qualify as an AFA to keep moving promptly through the assessment processes.

“From early 2011, the Securities Commission will be signalling to the public that if they want personalised investment advice they should be dealing with an AFA. “Investors have a right to expect their adviser to engage now to obtain the professionalism expected of them under the new regime,” he said.

“They shouldn’t have to wait until the law takes full effect on 1 July 2011.”

The new financial adviser regulatory regime

The main features of the regime, which began its phased implementation today, are as follows: Financial Service Provider Register (FSPR) All entities that provide financial services must be registered with the new FSPR from today, except financial advisers who have until 31 March 2011.

From 31 March, it will be an offence to offer financial advice commercially without registration on the FSPR.

The FSPR will allow consumers to check to see if someone or a company they are considering dealing with is a legitimate provider. Here's the website

Disputes and complaints

Every Registered Adviser is required to belong to one of four approved dispute resolution schemes.

This is designed to be the mechanism for resolving any issues a client might have with the service they have received from their adviser. The FSPR will list the dispute resolution scheme the adviser belongs to.

In addition, complaints about adviser conduct can be made directly to the Securities Commission from 1 December 2010.

Adviser categories

The main types of advisers are:

1. AFAs – registered and authorised

2. RFAs – registered

3. QFE advisers – entity is registered not the individual

Authorised Financial Advisers (AFA)

From today Authorised Financial Advisers begin receiving their AFA certificates and can start marketing themselves as an AFA. An AFA has qualified via a combination of exams, existing qualifications, and documentation to show good character.

Advisers wishing to qualify as an AFA have until 1 July to complete the process.

From 1 July it will be an offence to provide retail clients with investment planning services, or personalised advice on complex products, without authorisation. ·

Investment planning and personalised advice

AFAs are able to provide retail clients with investment planning services and personalised advice on Category 1 products.

Category 1 products are more complex investment products such as shares, certain unit trusts, KiwiSaver products and insurance products with an investment component. ·

Code of Professional Conduct

AFAs are subject to a new Code of Conduct that sets out the standards of professionalism that will be expected of an AFA. · “Independent” advisers From 1 December AFAs may not describe themselves as “independent” if they receive commissions or any other sales incentives to sell any financial product. ·

Disciplinary committee

A statutory disciplinary committee has been set up to consider possible breaches of the Code of Conduct. This comes into being on 1 December.

The Commissioner of Financial Advisers chairs this committee which may, for example, impose fines of up to $10,000 or recommend the withdrawal of authorisation.

Registered Advisers

Registered Advisers are only able to sell category 2 products, which are simpler off the shelf products such as mortgages and bank term deposits. Financial advisers have until 31 March to register on the Financial Service Providers Register.

Qualifying Financial Entity (QFE) Advisers

A QFE is a company that offers financial services and sells financial products.

QFEs undertake to take responsibility to provide a prescribed level of training and supervision for their employees that offer financial advice to the public.

A QFE adviser may sell category 2 products and any category 1 (AFA level) products that are produced by the QFE.

David Mayhew, center, presented the first certificates to four of the 10 Authorised Financial Advisors who had achieved their qualifications by December 1.

From left to right, they are: Colin Vazey,Vazey & Child Chartered Accountants and Business Advisers; Gavin Busch, NZ Financial Planning; David Mayhew, Commissoner for Financial Advisers; Verleene Robertson, Northland Money Management; David Milner, Britannia Financial Services.

Left to right: Colin Vazey,Vazey & Child Chartered Accountants and Business Advisers Gavin Busch, NZ Financial Planning David Mayhew, Commissoner for Financial Advisers Verleene Robertson, Northland Money Management. David Milner, Britannia Financial Services

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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Nice piece here from Patrick Smellie on how the Securities Commission did actually have plenty of powers to stop the finance companies.

Appearing before Parliament’s commerce select committee as chair of the New Zealand Business Roundtable, Bell Gully chairman Roger Partridge gave several "personal views" challenging the Securities Commission’s assertions that it had too few powers to move on errant finance companies.

While he accepted that the commission could not move to prosecutions before criminal justice agencies such as the Serious Fraud Office first completed their investigations, there was no shortage of legal powers available under existing law for the commission to have acted.

"As a practicing litigator, I would very much like the powers that the regulator has," he told the committee in submissions on the Financial Markets (Regulators and Kiwisaver) Bill, which will establish the new super-regulator, the Financial Markets Authority.

Call me silly, go on, you know you want to, but if I've got someone giving me investment advice, I'd rather that person could pass a basic economics exam, rather than advise me on his legally constructed code of ethics (that also doubles as PR for a professional body with a monopoly) and consumer law legislation.

Correct me if I'm wrong, but the AFA designation includes no technical component (this is right isn't it?)- you know, portfolio theory, the workings of capital markets, pricing of the firm, etc, etc. So we've put in more layers of bureaucracy, created a mammoth Police State super duper regulator at the heart of it all, but we still have  investing by numbers.

Oh no no no. 'Ethical' investing by numbers. Snort.

As Kim Jong said above, the laws already existed to stop the finance companies: we've just moribunded our economy even more for nothing. Part of the course, of course ...

Before August 2008 the State was somewhere between 46% and 47% of the entire economy, this is still rising ... I'll leave it to the AFA's to make the connection between that and the prospects of the domestic investment products they're selling. (And next time you're at your AFA's office, ask him what the technical definition of inflation is: if he can't answer it, ask yourself if the code of ethics has been constructed for him, or for you).

Tribeless, you are incorrect. The designation does require completion of technical components, although they are basic.


You are correct a little later and therefore I will not call you silly even though I want to. The regime will do nothing to stop tomorrows problem as it is set up for yesterdays failures, which there was enough power to stop.


Most of the people investing into finance companies did so themselves.


There are very few advisors specialising in investment advice as Kiwis know best and will not pay in the main, even if you have a masters degree in economics.


The main players these days are the banks, this law will do absolutely nothing to stop another ANZ-ING CDO fiasco. 

I used to work for a company that gave "investment" advice. They basically sold investment property, been liquidated now, but their investment advise was limited to property, they did not give advice on ANYTHING else. IMHO, nothing beats a well diversified portfolio, and their are a lot of investments people don't even think about too, like art, whisky, wine etc

Quite so Muppet. I'm sure this new regime is all very well intended and they do look very professional with their flash new certificates and all but isn't the whole concept flawed from the get go?

How can the investment advisory "industry" give worthwhile advice with such a huge conflict of interest? They should not accept commissions and should charge for  their advice. Otherwise cut the bullshit and call themselves what they are - sales offices. 

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Days to the General Election: 39
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