Wednesday 20th of April 2011

The IFA roadshow that recently ended has reinforced to me how valuable professional bodies will continue to be in a regulated world. Let me explain. First, I've talked before about this being a principles-based regulatory regime. The regulator will set expectations and guide where necessary but we won't prescribe advice practices down to the last detail. Professionals will work this out in the interests of their clients, with knowledge of their obligations under the law, including the Code. Secondly, we all know that the Code sets out minimum standards of professionalism but that too, deliberately, doesn't get overly prescriptive with regard to ethical behaviour, client care and Continuing Professional Development (CPD). Thirdly, while the Code was written for AFAs, the Act's 'if not why not' section 66(2) requires Category 1 QFE advisers to provide investor protection equivalent to that provided by advisers who are subject to the Code (ie AFAs). Finally, and I'll borrow an analogy from Ross Butler (Chair of the Code Committee), an AFA licence gets an adviser a ticket to the game but then it's how the game is played that matters - and it matters a lot. The combination of all these factors has created both a need and an opportunity for professional bodies to fulfil their true potential - set, share and uphold standards, provide top drawer CPD opportunities and raise the bar over time - for the benefit of their members and ultimately their members' clients. And by members, I mean all types of advisers, including those within QFEs. There's an opportunity for QFEs to capture the benefits of signing their advisers, not just their AFAs, up to professional body membership. On the subject of CPD, this is an individual responsibility.  AFAs need to make decisions about what sort of training will comprise their CPD for each year and where they're going to get it from.  They need to make sure that any professional development they undertake is suitable and adequate to meet the Code requirements.  Their professional body can help make these decisions and accessibility to training easier. On the question of what counts as structured CPD and what doesn't, I believe true professional bodies have a good handle on this principle and there are examples of it being implemented pretty well.  In fact in response to the submissions of industry and professional bodies, the Code Committee stopped short of a prescriptive approach to CPD in the Code.  Instead it specifies a broad framework within which NZ professional bodies, QFEs and DAOs (Designated Assessment Organisations) can determine what courses will be acceptable for their CPD programmes.  This creates a real opportunity for these organisations to decide what courses will be acceptable, including whether training is structured or unstructured and how many hours of CPD many be attributable. Finally there is a potential regulatory benefit to advisers who are members of a strong professional body. As I've blogged recently, we will take a risk-based approach to setting our monitoring priorities and deciding where to focus our attention.  Professional body membership tends to convey a positive signal about an adviser's attitude towards professionalism. The Commission is keen to continue working with professional bodies - helping them to help their members - not only to influence but also to learn as the regime matures - what's working and what's not?  Professional body membership gives advisers another voice with which to talk to us. Mel