Since the publication of the Code Working Group’s discussion paper, there has been considerable discussion and a good deal of activity.
This is hardly surprising given the scope of the task facing Angus Dale-Jones and his CWG – and the range of entities, interests, and stakeholders that have to be considered.
If politics is the art of compromise, writing a Code of Conduct acceptable to all parties is above and beyond mere politics!
There are a number of issues raised by the discussion paper that will attract responses from interested parties, and as the process has only just started, it would be inappropriate to suggest any conclusions until submissions have been received, considered, and discussed.
It is also worth noting that the process for the legislative review – FSLAB – is still in train and that the Select Committee has yet to decide whether any of the submissions received will alter the current Bill wording or intent. It is possible that the assumptions referred to in the CWG discussion paper have to be altered if the recommendations contained in their submission are not adopted.
At this stage, it’s hard to predict with any accuracy what the final Bill will look like.
However, it is a fact that out of the 60 or so submissions that made comment on the FSLAB content, approximately 20 made direct reference to the consumer being unable to distinguish between a sales transaction and the provision of financial advice.
The Minister has made a specific comment that consumers would be better served by clearer and less complicated PDS and disclosure documents being made available.
The continued attempt by the Big End of Town/VIOs to have their related activities regarded as financial advice when such activities are nothing more than product sales, falls into the same category of the demand for consumer clarity.
To be consistent, the Ministerial push for easier-to-understand documents and processes for consumers must seek clearly defined demarcation lines between sales and advice within FSLAB to avoid confusion at the beginning of the consumer’s consultation process.
The NZ Bankers Association submission to the Select Committee suggested that their employees should be referred to as Financial Advisers as that “in common parlance” is what they are. And this is not an unreasonable request – providing those employees are qualified, responsible, and liable for the “advice” they provide on behalf of their employer.
Indeed, if the NZ banks follow the trend of their Australian counterparts, withdraw from product manufacture, and set up Wealth/Risk Management units – subject to the same legal and regulatory provisions as any other similar entity - there would be no objections raised.
So why does product manufacturing provide a VIO with special treatment that renders the concept of a level playing field entirely meaningless?
Any individual in a client-facing financial services function should be suitably qualified in that area of financial services to a minimum of NZ Level 5 – no exceptions, no exclusions, no special treatment. This should apply irrespective of employment circumstances, occupation, or organizational scale.
The consumer should have confidence that wherever they choose to touch the financial services advisory industry, and whomsoever, they choose to deal with, that individual has the minimum qualifications necessary to provide an effective solution based on sound advice.
This is where we were in 2010 and had the BEOT lobby for the introduction of QFEs been rejected, we would not be facing today’s confusing tangle of alphabet soup, official bodies, committees, and sub-committees.
As soon as exceptions are accommodated, consumer clarity is compromised.
With regard to the above-mentioned qualifications, one aspect which has drawn wide acceptance is the ability of existing AFAs to transfer seamlessly into the new regime once the new Code becomes operational.
After a few years dealing with financial services regulation, I’d say it’s a safe bet that this will survive the debate.
Anyone wishing to make a career in the industry would be well-advised to contemplate obtaining AFA status soon.
There will be those who accuse me of scaremongering or suggest that there’s plenty of time left before anything has to be done – and they could be right.
In my view, I believe acquiring AFA status now is the best, least onerous, and easiest route to comply with the new regime.
Also, rest assured, while the time-scale may appear generous, it will be here before you know it – there are 36 weeks until Christmas 2018!
Tempus does indeed fugit!