Only Authorised Financial Advisers (AFAs) are allowed to give personalised advice on KiwiSaver, which is a category one investment product under the Financial Advisers Act; registered financial advisers (RFAs) can give ‘class’ advice on it but there is confusion over where the boundaries lie.
In a submission on the FMA’s consultation draft on KiwiSaver sales and distribution, PAA professional development manager Jenny Campbell said the scheme had been a “resounding success story” for New Zealanders but its success had created an unintended consequence.
“The demand for advice on KiwiSaver far outstrips the availability of this advice, given it is a Category 1 product, and there are only around 2,000 AFAs qualified to give this advice,” she said.
The Financial Advisers Act had made it more difficult for average clients to get advice on a popular savings product, she said.
“The ‘average’ New Zealander does not have a relationship with an investment planner. They rely on advice from the professionals that they interact with regularly – and for many New Zealand families, that person is their insurance/mortgage adviser,” Campbell said.
“Given that KiwiSaver is a largely ‘generic’ investment, it would seem sensible to let these professional advisers give class advice on KiwiSaver, as long as appropriate processes are put around this advice.
“This advice should be able to be given irrespective of whether or not the client is already in KiwiSaver.”
It would be simpler still, if KiwiSaver was reclassified as a Category 2 product, Campbell said.
“We believe that the current ‘care, skill and diligence’ requirements are adequate for KiwiSaver, especially when offered as just one part of an overall financial adviser service to clients.”
She said many RFAs would like to be able to give personalised advice on KiwiSaver, but the Investment module within the Level 5 Certificate of Financial Services and the requirement to be an AFA tends to be seen as a ‘bridge too far’ for advisers whose only interest in investment products is KiwiSaver.
“There are significant educational and regulatory costs associated with the step up to AFA, and as KiwiSaver has very modest remuneration attached to it, it simply has not made economic sense to seek AFA status simply for this one product.”