That’s according to Pathfinder’s John Berry, who says advisers have had trouble finalising their relationship with fund managers for the purposes of AML legislation, particularly where wrap platforms are involved.

He says the ideal situation would have been for the FMA to recognise financial advisers as the “owners” of their clients and to have them as the one reporting entity for that client. But both the fund manager and financial adviser will have to take responsibility under the new rules, which came into effect this week.

Berry said fund managers could not get rid of their liability for clients by dealing with a financial adviser. If there is a problem, they will be equally responsible.

Pathfinder is in the process of signing advisers up to agency agreements. For advisers who invest via a wrap, it will have to sign an AML agreement with the wrap platform and the adviser. Agent advisers will then be monitored periodically to ensure that their AML processes meet the standards.

Berry said: “Under this agreement, the fund manager appoints the financial adviser as an agent to conduct customer due diligence. The financial adviser will then not be required to send verified ID documents for each client, unless specifically requested… we don’t see value in replicating what the adviser has done.”

He said the agency agreement allowed the fund manager to request verification documents if an unusual transaction required a closer look. "For example, an investment followed by a quick redemption."

He said some fund managers might still want to see documentation for each client but Pathfinder was confident about the processes of the advisers it worked with.

Pathfinder had teamed up with other NZ boutique fund managers to develop an AML process with AML Solutions Ltd, Berry said. “If advisers have not done so already, we would encourage them to follow the same process of grouping together with other adviser businesses … and so sharing the cost and time needed to finalise these policies.”