Regulation
Latest AFA numbers
Tuesday 29th of March 2011
The figures come less than a week after the regulator revealed just 2559 advisers had sat and passed the Standard Set B exam - the best indicator of AFA numbers.
While short of the Securities Commission estimate of 5,000 AFAs, the Commission's Mel Hewitson said she expected more advisers to become AFAs after the March 31 deadline.
"I think we're probably more likely to end up by July 1 with somewhere between 2,000 and 3,000 AFAs and then there'll be more that come after that," she said.
The Commission also released a list of 24 Qualifying Financial Entities (QFEs) that have been sent their formal QFE grant certificates.
The list of QFE-accredited companies includes names such as AMP, Avanti Finance, Fisher Funds Management, Sovereign and Spicers Portfolio Management.
Comments (11)
Mike King
I, too, have met all the requirements to qualify as an AFA, but why bother? When there was only this one option, I diligently pursued it, at significant cost in time & treasure. Bah! So, now that I don't have to take that path, why would I, given the substantially higher cost and so on?
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13 years ago
Simon Rule
There has been a lot of misinformation feed to the adviser community on the supposed "benefit" of AFA status and what it would mean for an adviser’s business in the new regulatory environment. The numbers above show that the vast majority of advisers have clearly opted to be registered instead and why wouldn’t they?
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13 years ago
Chris Hardcastle
I think RFA's may be doing themselves a disservice if the comments above are anything to go by. You only need to look at the Australian experience to realise that the RFA option will be short lived before further regulation comes in. In addition with the global push for commissions to be removed, RFA's living off insurance commissions and overriders may have a limited lifespan if they don't upskill
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13 years ago
Chris Hardcastle
Regan and anon2. I’m not in disagreement with you. I too make a good part of overall remuneration from insurance and happily disclose up front actual dollar and % income I make from the actual sale with each client – interesting huh? And none of them balk at it. I also charge direct fees for planning work. Interestingly Asset Magazine just had 2 articles in the same edition, one the results of research which showed clients don’t care how much commissions are when they are told and are happy for the insurance person to receive it and another article where Obama is saying all commissions in the U.S. will be gone in 2012.
The point I was trying to make is that this is the first leg of regulation. If the only offering by an adviser is insurance sales and income is by commission, it’s a risky business moving forwards as it’s not disclosure that is the issue but more regulation and potential removal of commissions. Your clients don’t care how much commission you make as long as you also can and do provide choices and don’t disguise how recommendations are made.
Regan, if you think you can operate like an AFA and be an RFA/QFE adviser, you had better revisit the legislation, as they are worlds apart. If you are holding yourself out to be like and AFA and you are not an AFA, you will be in the firing line for some pretty harsh stuff.
I can assure you that for me the AFA requirements have been a horrendous toll on income time and fees to regulators and trainers, and I’m dreading the prospect of a levy apportioned to AFA’s due to the cost of regulation. If it happens and it’s too high I’m either out of business or to RFA status doing pure insurance sales, or getting a job somewhere. We are all in the same boat, just doing different things.
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13 years ago
Simon Rule
Muggins raises an interesting last point. If an authorised adviser decides at a later date that they’ve had enough of regulators looking over their shoulders every five minutes or simply cannot afford excessive compliance costs to their business can they then simply elect to be registered instead? Naturally this would limit them from selling/advising on investment products but it might be something a lot of advisers opt for if the regulators go overboard.
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13 years ago
Ron Flood
Tried to stay silent on this one as I believe that everyone who has studied over the past year is a much better adviser for it, even if they no longer travel down the AFA path.
The following statement by AFA muggins shows how misinformed some people are.
"The point I was trying to make is that this is the first leg of regulation. If the only offering by an adviser is insurance sales and income is by commission, it’s a risky business moving forwards as it’s not disclosure that is the issue but more regulation and potential removal of commissions."
Commissions on risk products are in no danger of being banned in the foreseeable future. Reduced maybe,but due to the underinsurance in New Zealand banning is not a current option.
What is on the horizon is the likely ban on trail commissions for products such as Kiwi Saver, especially if the Government decides in the future to make Kiwi Saver compulsory.
Product providers have consistently encouraged advisers to build up a large Kiwi Saver base by giving them projections of massive future renewal streams. I would suggest to AFA Muggins that it is a risky business for these advisers going forward and not risk advisers.
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13 years ago
Chris Hardcastle
Ron, I have no intention of entering into an argument over the commissions issue. I agree, commissions on investment products will probably go, and most AFA's will then use a wrap platform to get around that where they can an continue to rebate management fees and make it more expensive for the client by having to charge fees above the rebate plus the GST that has to be added on. If markets are going well, that approach is palatable to the client. If markets are dropping, again the value add gets questioned by the client.
Although it's unpalatable to advisers that insurance commissions may drop or disappear, (I'm with you on that) denying the possibility may mirror the denial a lot of us had about the regulation we are now embracing through compulsion.
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13 years ago
Chris Hardcastle
btw, my understanding is that an RFA can only give personalised financial advice on a category 2 product, but can give class service to a retail client and financial adviser service to a wholesale client.
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13 years ago
Clayton Coplestone
Food for thought: What if the client had a commission free channel (accompanied by useful tools and a significant advertising campaign) to purchase any financial services product? What if the large institutional asset gathering machines decided that the future backing of intermediated advice was too expensive & inefficient relative to phone and over-the-counter sales?
What does any of this have to do with the above – simple: Every shortcut that the industry pursues (whether in isolation or collectively), gives the customer one more reason to distrust intermediation and look for alternatives.
It is important to understand that the Regulator is trying to re-install confidence in the NZ financial services industry through increased transparency and a minimum education level.
It may be worth reflecting on this before wading through the trash above.
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13 years ago
Chris Hardcastle
Independent Observer. a commission free channel is great - as is a fee free channel. The issue is that you are talking about a QFE type arrangement or direct purchasing off a product provider without analysis which will limit choice and clarity. A case in point is most Bridgecorp investors went direct. Intermediation is no problem with clarity and disclosure and absolute transparency - then the client has choice based on understanding. If the client doesn't feel they get value from advice, they don't use the adviser.
The problem is that regulation which is supposedly to protect the consumer will make advice beyond the ability of most to afford it. THAT is a bigger problem. Clients who cannot afford advice will be left with guess work, rumour advice and Kiwisaver.
Your ongoing issue with intermediation is unique to this industry? or are you also thinking retailing should be banned so that we buy consumer goods direct from manufacturers as well?
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13 years ago
Simon Rule
Yes well said Graeme. Excellent comment!
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13 years ago
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