Code Working Group Chair, Angus Dale-Jones, has addressed concerns raised last week by Financial Advice New Zealand on the final Code of Professional Conduct.
The association’s CEO, Katrina Shanks, said that the Code had fallen short in the area of qualifications and professional development (see: Code Falls Short – Financial Advice NZ…).
She said the association had issue with the Code not including a minimum qualification for all persons providing regulated financial advice or a minimum level for CPD.
Speaking to RiskinfoNZ, Dale-Jones explained the thinking behind the Code on these issues and emphasised it was important to remember that the Code is a microcosm of the bigger conduct piece about the accountability for good customer outcomes.
On minimum qualifications for all persons providing regulated financial advice:
Referring to the liability provisions in the Financial Services Legislation Amendment Act, Dale-Jones noted the liability works differently for the two types of ‘natural people’ – financial advisers and nominated representatives.
“For financial advisers, they have liability personally and that can subject them to disciplinary action including the suspension of the ability to practice as a financial adviser or even barring them from practicing as a financial adviser,” he said.
“At a personal level, they have to be able to show that they have complied with the legislation so that is a really strong incentive for individuals who are financial advisers to go and get the qualification themselves.”
But he said for nominated representatives, liability rests with the financial advice provider business.
“In answering the question of how are you going to deal with the competence requirements in the Code, you have to understand that liability because now it’s focusing not the mind of the individual nominated representative but it’s focusing the mind of the directors of the business themselves,” he explained.
“There need to be processes and controls in the financial advice provider to ensure that there’s a limit around what the nominated representatives can do…then those processes and controls also need to regulate the advice given by the nominated representatives,” he added.
He said processes and controls become far more complicated for FAPs if they don’t have their nominated representative at the front with the Level 5 qualification.
“It’s true that if a person is doing a limited advice role you will be able to design a business where they don’t have to get the full qualification, but that’s not comparing apples with apples – that is a very limited advice role,” he said.
“If you’ve got a nominated representative, potentially doing for all intents and purposes a full advice role, it’s going to be very challenging for a business not to take them through the Level 5 process or something very close to it.”
On a minimum level for CPD:
Dale-Jones explained they didn’t include a specific requirement in the Code for CPD as the focus was on keeping the Code principles-based rather than on specifics so it could be applied to all kinds of advice situations, such as roboadvice and limited advice roles.
But he said keeping CPD principles-based leaves a place for professional associations to include a minimum number of hours for their members, for example if their members generally work in a certain environment.
“So the professional associations end up having a leadership role in helping people navigate it,” he said.