4 Factors for Advisers in Strategic Planning


1.    Done and Dusted - The debates and discussions around the legislative review, process, and content are all but over. We now know the nature and dimensions of what the amended Financial Markets Conduct Act will look like. Views on the suitability or wisdom will no doubt continue to be expressed, but to all intents and purposes, it’s a done deal. Many will consider the outcome far from ideal – with justification in many cases – but it is what it is and we now have to get on with working out how best we do business in the new and evolving environment. As Strategi has been promulgating for some time now, Advisers are faced with three choices – leave the industry, join a Financial Advice Provider, or become a Financial Advice Provider. The decision will depend on future intentions, client services provided, and business capability. There will be plenty of material forthcoming from a variety of sources in the weeks and months ahead, but the decision facing advisers distils down to the three decision pathways mentioned.

2.    QFEs - From the recommendations of the Select Committee, it appears that two issues around QFE status have been amended. Firstly, FSLAB held that all advisers – except QFE advisers – would be classed as Financial Advisers in the transitional licensing period. This rendered hiring and training new recruits to the industry virtually untenable. This has now been addressed and the ability to take on trainees has been included. So, one of the reasons for adviser entities to consider QFE status has been removed. Secondly, the pathway to a full license at the end of the transition period is no longer assured for any transitional licensee, including those with QFE status. So, another reason for considering applying for QFE status has been eliminated. The decision to apply for, or retain, QFE status will depend on the nature, style, and strategic plan of the enterprise, but for most private, non-aligned, independent adviser businesses, the potential attraction has gone.

3.    Alignment - The Code Working Group will now be clear on the framework within which they have to develop the revised Code of Conduct. With MBIE as the driving authority and the architect of the legislative review, don’t expect the Code to deviate too far from the principles expressed in FSLAB. With the resurgence of de facto tied agent status (or even de jure), and the Select Committee deeming financial advice to be provided when only one product solution is offered, the concept of ‘product advice’ floated in the CWG Discussion Document is likely to be legitimized. Alignment between the new Code of Conduct and the revised Financial Markets Conduct Act is inevitable.

4.    Cooperation - During the 3-year review process, lines of communication were established, stakeholder relationships developed, and constructive interaction among financial service industry participant, regulators, politicians among others featured as a positive function. With the legislative process nearing its final stages, and work continuing within the Code Working Group, the opportunity to continue with this collaborative approach on an ongoing basis should not be missed. As frequently mentioned here, with no apology for repeating and emphasizing same, the alternative of adversarial relationships between industry stakeholders and government appointed bodies creates a dysfunctional and destructive environment. If there is any doubt about this issue, please visit the website of the Royal Commission in Melbourne and tune into the live webcast during the proceedings. The NZ industry descending into the abyss that is the Australian experience would be catastrophic. It makes sense to seek to formalize the co-operative interaction among stakeholders so that we can collectively maintain a consumer-centric, effective, and evolving industry.


David Whyte