News

Call to relax KiwiSaver advice rules

Friday 31st of August 2012

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."

Comments (8)
Alan Kelly
The PAA is to be commended for making the submission it has. I have long argued that KiwiSaver should be classified as a Category 2 product. While the PAA has (correctly) put forward the case that the demand for KiwiSaver advice outstrips the available supply, I would in the first instance argue that the legislative and regulatory framework around KiwiSaver is so robust and prescriptive that it does not need the additional layer of control which is built around Category 1 products. Re-classifying KiwiSaver as a Category 2 product is a practical and sensible move.
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12 years ago

Daryl McAlinden
Kiwisaver is an investment product, not an insurance product. If you want to advise on investment products, do the work to become an AFA or join a QFE.
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12 years ago

Wayne Ross
Silly me, here I was thinking that NZers might benefit from good quality investment advice when apparently all they really need is a 'generic' product flogged to them by someone who is not prepared to meet a very basic educational requirement...
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12 years ago

Carey Church
Jenny Campbell 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." Really? Exactly what is their interest in KiwiSaver? The Trail commission? So what are they going to do when the balance in their clients "largely ‘generic' investment" reaches $100,000. $150,000, $200,000 and apart from their home is their only other asset? Give 'largely generic advice?' Giving investment advice is not an easy process, it involves actually understanding your clients and their goals and their reactions to risk. That is the reason that there is education required to give advice. I fully agree with Forthright, and frankly, think that there should be more rules, stopping the bank advisers from 'churning' KiwiSaver with misinformation and 'largely generic advice' to clients.
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12 years ago

Austin Fisher
Joining KS for the first time, it's not such an issue. It's a great scheme and most people join it with no advice at all. Where it's going to get interesting is when balances become substantial and advisers want a piece of the action. Making KS Cat 2 will make it very easy to spirit that money away. I say keep it at Cat 1 to stop KS becoming a feeding frenzy in a few years' time.
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12 years ago

Carey Church
Agree entirely with Andrew, I'm perplexed as to why people across the board aren't jumping up and down about the bank practices around KiwiSaver. I have a friend who worked as a 'teller' in a bank who had big targets to sell KiwiSaver, but no real knowledge of how it worked.
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12 years ago

Broker Broker
Can we just agree and be happy that mortgage brokers shouldn't be selling KiwiSaver? Been there done that haven't we? (Remember NZF, Hujich, John Banks, Don Brash anyone?) Can't say that was a roaring success...Maybe there are some trail commissions in question here?
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12 years ago

patrick diack
If it was made a class 2 product,then Maybe I could become an RFA (with a bit of study) and start selling kiwisaver again? I promise I wouldn't pay my customers $10.00 to join, as got in a bit of trouble with the FMA.
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12 years ago

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