sign up log in
Want to go ad-free? Find out how, here.

In today's Take Five, Amanda decodes five pieces of financial services sector jargon and why you should care about them

Personal Finance
In today's Take Five, Amanda decodes five pieces of financial services sector jargon and why you should care about them

By Amanda Morrall

When sport isn't dominating the conversation in our office, and we're not placing coffee bets on financial disasters waiting to happen, and we're not tapping out stories, quite often we're taking the proverbial p out of weird, whacky and ridiculous people or "products" within the financial services sector. For example, earlier this week we were having a laugh about the overuse by the industry of the word "solutions" as though they were somehow a magical fix to our financial woes when really they're just mass produced products sold for profit.

Yes, we're a highly cynical bunch. It's an occupational hazard I'm afraid.

Today on TVOne's Good Morning show, I talked about something that might be construed by some as just another one of these financial sector rorts; dispute resolution schemes. As it turns out, this little known facility (introduced two years ago) is something that might actually work in favour of the little guy. For my column today I thought I'd decode five pieces of financial sector jargon introduced under the new regulatory framework governing the sector.

1) Financial Services Provider Registry (FSPR)

There are more acronyms under the new Financial Services Providers (Registration and Dispute Resolution) Act, than you can shake a stick at but let's start with this one. The FSPR is an electronic registry where all financial services sector players are required by law to be named. You can access the website here through the Companies Office. What is it good for? The registry allows you to identify registered parties you might be transacting with, it shows their place of business and also what kind of services they are allowed to provide. It will also allow you to see which dispute resolution scheme your provider is affiliated with, a requirement under the new law.

2) Dispute resolution 

Dispute resolution schemes are a new form of recourse for disgruntled consumers. They act as an independent third party who can adjudicate unresolved complaints. In some cases, compensation can be ordered up to $200,000. So when do you call on them? When you are deadlocked with your provider over a complaint.

To date there are four approved dispute resolution schemes: 

Financial Services Complaints Limited
Insurance & Savings Ombudsman
Banking Ombudsman
Financial Dispute Resolution

Dispute resolution schemes are free to consumers. For more frequently asked questions about the process, procedure and outcomes see the FAQ section on the Financial Dispute Resolution website  here.

3) The Financial Markets Authority (FMA)

The establishment of the FMA was the Government's response to the meltdown of the finance company sector, replacing the discredited Securities Commission with some additional powers in April 2010.

The FMA oversees and enforces laws related to securities exchanges, financial advisors and brokers, trustees and issuers of superannuation schemes including KiwiSaver. It also enforces securities, financial reporting,  and company law as they apply to the financial services and securities markets.

4) RAs, AFAs, and QFES 

Yes, I know I've written about the difference several times however I'm still greeted by blank stares when I mention AFAs.  In short, these are the designations ascribed to the professionals working in the financial advisory sector. Crudely put, an authorised financial advisor (AFA) has a higher threshold of professional qualifications and standards to meet than registered advisors (RAs) and is the only professional legally able to dispense personalised advice. Qualified Financial Entities (QFEs) are businesses that provide financial adviser services and have been approved by the FMA to "take responsibility for the conduct of the financial advisers they employ as well as any nominated representatives."

5) Category 1 and Category 2 products

A key thing that differentiates RAs from AFAs is the type of products they are legally allowed to deal in. As the FMA explains on its website here, category one products are considered to be more complex or sophisticated and are therefore restricted to AFAs. They tend to have an investment focus and include "securities, land investment futures contracts and investment linked insurance contracts." Category two products, the domain of RAs usually, include things like insurances, mortgages, terms deposits and consumer credit contracts.

Where it gets confusing is that in some cases, RAs and QFEs can, by virtue of certain disclosures, deal with category one products provided only class advice is given. For example a bank teller working for a QFE, can sell you a KiwiSaver scheme (which would fall under a category 1 products) provided they don't give you personalised advice on it. That is they can only talk about what's on offer at their place of employment. To me, this categorically doesn't make any sense and if you care to hear my reasons why, see my opinion piece on it here.

To read other Take Fives by Amanda Morrall click here. You can also follow Amanda on Twitter @amandamorrall

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.


Gee I am surprised they can award as much as $200,000 - that's a lot fo money and must cover most disputes.  Or is it they set it high and leave it for twenty years and let inflation erode it's usefulness?