Business Risk Advisers Challenged to Meet Obligations Under New Regime 


Managing Director of Triplejump Group Holdings, Cecilia Farrow, is questioning whether the many risk advisers that provide business risk as part of their service offering will be able to meet the requirements for competency, skill and knowledge under the new licensing regime.

“Are organisations that are planning to become a Licensed Financial Advice Provider going to be in a position to ‘vouch’ for the advice being provided by Financial Advisers under their license?” questioned Farrow.

Triplejump Group Holdings Managing Director, Cecilia Farrow

She explained the Code of Conduct sets the minimum standards of general competence, knowledge and skill advisers will be required to demonstrate as equivalent to those of the Level 5 New Zealand Certificate in Financial Services. The relevant strand within the qualification that ‘life’ risk advisers would need to complete is the Life, Disability and Health strand which is specific to Personal Risk advice.

Farrow noted, however, that there are no unit standards for business risk in respect of death and disability risks in the Level 5 Certificate.

“It is well understood that Business Risk is substantially more complex than Personal Risk and requires an adviser to undertake specific learning and training to obtain the knowledge and competencies to acquire the skills to provide diligent advice to business owners,” said Farrow.

“The learning pathways that advisers have typically undertaken for Business Risk have been training courses provided by insurers and/or the attainment of the CLU mark which required the completion of a diploma level qualification which included papers specific to Business Risk Advice.”

Farrow said as the Code of Conduct is principle based, in her interpretation this places the responsibility for determining what is required to comply with the code on the shoulders of the Financial Adviser and the licensed Financial Advice Provider.

Farrow highlighted the following issues that should be considered if Business Risk is a financial advice service being provided:

  1. Can you demonstrate you currently have the particular competence, knowledge and skill to provide financial advice in Business Risk?
  • What training can be evidenced
  • When was the training undertaken
  • What knowledge did the training cover
  1. Can you demonstrate you have kept your competence, knowledge and skill up to date and are continuing to do this?
  • What ongoing training has been undertaken and when
  • How have you kept up to date with new product development
  • How have you kept up to date with changes to law, tax and estate planning that are relevant to Business Risk
  1. Are you confident you are exercising the care, diligence and skill that a prudent financial adviser would?
  • Is the advice process structured and documented
  • Is it likely to comply with the law and the Code of Conduct
  • Is Business Risk advice an integral part of the firm or an occasional service – if an adviser is only occasionally (maybe 2-3 times a year) providing Business Risk advice is it enough to maintain skills and competency
  • If your advice is challenged – maybe a client lays a complaint against you – are you confident that an expert in Business Risk would be able to say your advice reflected the skill and diligence of a prudent adviser

“Organisations intending to be licensed Financial Advice Providers should be asking themselves the same questions in relation to the Financial Advisers that will operate under their License and determine what the organization will need to do to enable advisers to provide Business Risk advice which avoids unintentional breaches of the law and code,” said Farrow.

TripleJump provides software solutions for Business Risk Advice and Business Risk training.

Farrow is also the Practitioner Director for Risk on the Financial Advice New Zealand board, however her views expressed in this article are solely hers and are not intended to represent the views of Financial Advice New Zealand.