Going forward, there is no class advice provision; it is the supply of information or full advice, with nothing in-between.

What organisations’ scope’ as their advice is going to be a whole different discussion for later, but class advice as we know it, is off the table.

In NZ, we have a problem with KiwiSaver and default funds, and on the most part, outside the banking grab of clients, RFA advisers have been educating clients and tidying this up.

However, we still have many KiwiSaver members who have done nothing about changing things. Some of my own clients have got to the third year of talking about it and still haven’t.

More from lack of action than a willingness to do something, an agh aspect of the whole situation given I’m not an investment adviser and have limits on what I can and cannot do.

Yes, I hear those of you muttering just do it for them, and yes, that’s the answer on the risk side I would generally take, get sign off and carry on.

However, this is a category one product, and I’m limited in what I can do for the client, they have to do it for themselves.

Moreover, this is an aspect we are all going to have to get used to in the coming months as we have borders on our scope applied through licensing constraints and other code and legal requirements.

I think what we have coming is good for New Zealand, and for good advice businesses they have little to be concerned about. What’s more of a concern is how VI organisations are going to adapt to a full advice sales channel and how smaller adviser businesses are going to get up the curve? However, as usual, I digress.

Back to KiwiSaver.

Under the new rules for KiwiSaver; being involved with a client moving from conservative to balanced or growth to conservative is a trigger for full advice.

So sitting with a client in a default scheme, without being a qualified and licensed investment adviser, is going to be limited to:

This is KiwiSaver.
This is how it works.
These are the core things you need to be thinking about.
And, you need to go figure out what you need to change/do with it or talk to an investment adviser…

The issue here is the same issue I initially had with KiwiSaver before the FMA guidance as an RFA; in referring to a KiwiSaver provider, we’re implicitly recommending the product provider.

Under the new rules in referring to one of the direct KiwiSaver providers, we are going to find ourselves with similar issues of recommendation. Refer to an investment adviser, not affiliated with a KiwiSaver provider; we don’t trigger the advice burden by implying the ’better’ provider.

And no, I’m not being pedantic about this, as we have had a couple of advisers find themselves in court after referring clients to particular people when the subsequent transaction turned to custard.

Yup, the difference between a referral and a recommendation. Something a financial adviser talking about KiwiSaver is going to find it hard to differentiate, even with the right paperwork. A jury of peers will be the judge, and they don’t like paperwork that weasels out of responsibility…

The other piece that has been ignored to date, and probably should not have been, at the same time common sense dictates that there is a logical impact.

The withdrawal of KiwiSaver funds for home lending. Without the following advice about the decision and the potential long term impact on retirement savings, there’s more than a few issues here.

If a change of funds within the same fund manager triggers advice, then a withdrawal of funds should also trigger advice requirements. My understanding is that it does.

As I said earlier, it has been ignored to date as it has been a’ helpful’ solution to getting people into homes they would not have qualified for without KiwiSaver. Moreover, this has served the government’s PR machine, in the face of the noise on housing, quite well.

However, that doesn’t make the advice issue around KiwiSaver withdrawals for housing right.

For most RFA risk advisers this isn’t a concern, they don’t do lending.

However, for the mortgage advisers going forward, there is going to be a need for them to be careful around this aspect, especially if they are’ educating’ clients. There is a resulting conflict of interest if the clients lending only works if they use their KiwiSaver.

Which means that advice around the impact on retirement savings and the plans to buy a home is going to become somewhat mixed together. Also, a typical mortgage adviser is not going to have the education and licensing to cover this financial planning activity.

The more I dig into this stuff, the more I’m finding overlap with current advice models and practices if we take what has been presented to us on face value.

The FMA has been silent to date on clarifying the gap between their guidance and the new law and code on KiwiSaver.

It is time we had an update in this area so RFA advisers who have been doing KiwiSaver work can have clarity on the regulator’s view, so they can then make decisions about what they have in their businesses and what change(s) they are going to have to make.

As too, for the KiwiSaver providers, they need clarity on the impact on their businesses so they also can move to serve their clients better, as they don’t have any answers for us either.