TMM has reviewed submissions to the CWG made by two of New Zealand's biggest adviser groups, The Mortgage Supply Company and NZFSG.
NZFSG does not believe the new code should require Financial Advice Providers to document and maintain “ethical processes” and make them publicly available. The group believes this should be incorporated within the Code of Professional Conduct to “ensure consistency and transparency” in the industry.
NZFSG agrees that FAPs should be able to demonstrate that they meet standards of ethical behaviour as if the FAP provided advice directly. Yet the group warned it may be impossible to detect some “unethical processes” at adviser level, such as employment issues, sexual harassment, or advisers telling clients to disclose false information.
Elsewhere, NZFSG raised concerns about the combined expertise approach to “competence, knowledge, and skills”. The group says that while combined expertise may work with smaller FAPs, it “creates problems for a larger FAP”. NZFSG believes a combined expertise approach would burden groups and put the onus on them to assess each individual. The group says it prefers an industry standard qualification, such as the NZ Certificate in Financial Services Level 5, as the minimum standard requirement for financial advisers.
In its response, The Mortgage Supply Company also raised issues with the code. Jenny Campbell said she did not object to FAPs having to publicly document ethical processes “as long as this is not a cumbersome process”. She said such a move would be “somewhat overkill” for a one-man band adviser, however.
The Code Working Group asked respondents whether it was necessary to get explicit sign-off on the soundness of financial advice provided directly by an FAP. The Mortgage Supply Company said this was a “major concern” that would add “an enormous burden on advisers and groups”: “We would also be very concerned that if advice is signed off by another party (say a Head Group for example), then the adviser may feel that the ultimate responsibility for that advice does not sit with them, and if advisers are not personally accountable for that advice, we will see poorer client outcomes.”
The two groups have differing views on how to recognise the experience of a Registered Financial Adviser. NZFSG said there should be an industry standard qualification, such as the NZ Certificate in Financial Services Core and Specialist Strand. The Mortgage Supply Company said advisers "should be able to complete a back-fill type quiz or test to check on basic competence”.
The responses come as Code Working Group chairman Angus Dale-Jones says the group is reviewing about 2000 pages of submissions. Its next steps in the process of developing a new code of conduct for the financial advice industry will take place over the next two months.
Submissions closed at the end of April in the group's first formal round of consultation. Dale-Jones said 161 were received. The group has one meeting already to discuss those submissions and will hold another on June 20. "There's quite a lot of material to work through and we want to give it due attention."
