The group is working on developing the new code of conduct that will apply to all financial advisers under the new legal regime.

It has proposed a qualification standard of a level five certificate for product advice and a degree for financial planning.

But providers will be able to argue their advisers and nominated representatives have met these standards “in aggregate” if their systems and processes backfill enough of the advice that the output is of the level required.

David Greenslade, of Strategi, said the group had lessened the clarity for advisers and organisations about the minimum standards required. “If the education requirements are not really clear, then certain sectors of the industry will 'game' the system to avoid doing the base work and the NZ public will not have been well served at all with the new code,” he said.

“It is likely that most advisers in the new regime will need to have the minimum education standard of NZCFS5 or an equivalent. If there is any perception amongst advisers and organisations that their inhouse 'equivalent' is easier and quicker than doing the formal NZCFS5, then many will want to go down the equivalent route.

“Building an 'equivalent' to the NZCFS5 and then having the FMA assess the equivalence of that will be a nightmare. The FMA does not have the time nor the staffing to assess whether a large organisation's in-house training is to the same standard as that of the NZCFS5.

"Then the output of the training will need to be assessed and moderated over time so it could be several years before it is known how effective the in-house equivalent training is. If it was not up to standard then there could be many people in the industry providing advice who are at a lower standard to that of those who have achieved the NZCFS5 qualification.”

Advisers currently operating as AFAs will be able to continue in the new regime. Greenslade said it was misguided to assume that they automatically had the required competence.

“That could be a misguided assumption as many AFAs today have been grandfathered into the current regime so grandfathering them a second time means they could be lacking some of the competence knowledge and skill required for the new regime. Operating in the new regime is different to operating in FAA land so there needs to be some level of confirmatory assessment of AFAs.”

Gary Young, of IBANZ, which operates Professional IQ College, said he was not convinced the working group had it right yet, either.

“The main issues lie in the competence area, given how different the various sectors within financial services are I don’t believe there is a one-size-fits-all solution.”

Neither organisation had seen an increase in inquiries since the proposals were revealed.