DIMS 'continuum' may prove frustrating
The second tranche of the act’s regulations was released last week.
The FMCA requires advisers who operate class DIMS to apply for a licence from the FMA. Only those who offer a service personalised to each client and their goals and financial situation will be able to continue to operate DIMS under the FAA.
FMA director of compliance Elaine Campbell has said that most AFAs currently providing DIMS are doing so under a class model, mostly because they are using model portfolios. That situation is expressly excluded from personalised DIMS under the legislation, which says personalised advice cannot be advice customised from an investment strategy that applied to a class of clients.
Steps were being taken to make the application process easier for those offering “simple DIMS” such as model portfolios.
But adviser Wayne Ross said there was still uncertainty for AFAs about which side of the line their strategy would fall under.
"We are reviewing whether we will apply for a licence under the FMC. We understand there has only been one application lodged so far and given there will presumably be a variety of different firms (size, client profiles, investment process) it is still largely unknown how the FMA will view the different applications," he said.
"As far as I can till there is still no clear information on what constitutes a personalised DIMS. They have clarified requirements about reporting but still no clarity on how you can actually deliver this type of solution."
Jeremy Muir, of Minter Ellison Rudd Watts said the type of service many advisers would like to provide was more likely to fall within “class” than “personalised” DIMS. “They would generally use some kind of pre-generated asset allocation framework and customise it for the client, rather than starting with the proverbial blank sheet of paper. This implies that you need a DIMS licence.”
He said the legislation and the FAQs provided by the FMA did not provide a defined line on where advisers would be counted as being within the AFA realm for DIMS. “It’s a continuum.”