Competency Standards, Definition of ‘Advice’ Questioned at CWG Roadshow


The Financial Advice Code Working Group (CWG) Roadshow commenced in Auckland this week, during which adviser competency standards and the two proposed categories of the term ‘Adviser’ were debated.

The Roadshow, which needed to provide an additional afternoon session due to overwhelming demand, follows the release last week of the CWG’s Code of Professional Conduct for Financial Advice Services consultation paper.

Code Working Group Chair, Angus Dale-Jones

CWG Chair, Angus Dale-Jones, moderated a constructive discussion including the critical issue of future adviser competence requirements.

Dale-Jones said the minimum competency standards outlined in the draft Code would apply to two proposed categories of advice: ‘product advice’ and ‘financial planning’.

The draft Code proposes a Level 5 certificate would be required for those advisers determined to be providing ‘product advice’, while a Level 7 degree or potential Level 6 certificate would be need for those delivering ‘financial planning advice’.

“This is controversial because it’s talking about particular educational standards,” Dale-Jones told his audience. “What we tried to do here is set some indicative levels and start the conversation and we know full well that the conversation will end up being somewhere different from this.”

As yet, it is uncertain where RFAs fit into these two proposed levels and also how the industry experience gained by long-term advisers should be recognised when determining the future levels of competence that will be required.

“Sending RFAs to university is a tall order…it’s not about driving 3,500 people out of business.”

“We need ideas for recognising the abilities of RFAs,” said Dale-Jones. “Sending RFAs to university is a tall order…it’s not about driving 3,500 people out of business.”

On the recognition of prior learning, one adviser noted, “I think someone who is a chartered life underwriter …that learning experience should be recognised.”

Another adviser suggested the notion of having only two categories of ‘Advice’ needed to be reconsidered: “Between product advice and financial planning there’s a whole range of more general financial advice.”

Although a degree level might not be a practical option for advisers nearing retirement, the adviser added that, for young people obtaining a degree level, they may then join the industry and take on the businesses of advisers soon to exit.

Dale-Jones said the CWG is trying to set the standards at levels that are both appropriate and motivating for those newly entering the profession.

…the new standards are about the reputation of financial advice

He said the new standards are about the reputation of financial advice, investing in it and making sure the entire sector benefits as well as the consumers:

“This is about actually helping the whole profession evolve – it’s not about terrorising RFAs,” said Dale-Jones. “We need to find a way of bringing RFAs along. I’m sure there’s a pathway there. We just need to find it.”

Along with the proposed minimum competency standards, the draft Code also covers areas in ethical behaviour and conduct and client care.

The consultation paper includes five principles, which took into account feedback from October focus groups last year, which the CWG said helped in the design of the draft Code. As outlined in the Consultation paper, the five principles are:

Principle 1

The Code will focus on good advice outcomes for retail clients, having regard to both availability and quality of advice. This means that the client receiving advice is at the heart of the Code.

Principle 2

The Code will be drafted on the assumption that most retail clients have basic knowledge but not the Financial Advice Provider’s expert understanding.

Principle 3

The Code will be drafted in a clear, concise and effective manner, with a principles-based approach that allows for flexible application to a wide range of situations.

Principle 4

The Code will be drafted to promote good advice outcomes irrespective of how the advice is delivered. It will allow for varying degrees of reliance on business process.

Principle 5

The Code’s ethical behaviour standards will be consistent for all advice situations, and are relevant to the advice business, its officers and advisers.

Advisers can click here if they wish to make a submission to the Financial Advice Code Working Group, where submissions close on 30 April 2018.