There is a great deal of debate amongst a number of advisers around what level of qualification they need to attain and what products are Cat 1 or Cat 2. Human nature logically tells us that we should take the easiest route and make life simple and safe. However, if we follow this natural instinct, then we could be short changing our businesses for years to come.
There are a number of advisers (predominantly those who focus on selling insurance) who think they do not need to become an Authorised Financial Adviser (AFA) and only sell Cat2 products so will either join a QFE or else just be registered but not authorised. Their concern seems to be two fold.
Firstly, they do not want to meet the proposed Code of Professional Conduct and have to supply all advice in writing and have to ensure that the products and services supplied to clients are fit and appropriate for the needs of the client. Secondly, they are concerned about upskilling and having to attend Level 5 National Certificate in Financial Services training courses and assessments.
These advisers either believe they are above the requirement for training due to their years in the industry or else there is a fundamental fear of failing the courses.
In recent months, I have become involved as a contractor to Strategi Ltd and have been attending training courses to equip me to become a qualified mentor and assessor in the Level 5 training courses that Strategi is rolling out to the industry. These courses plus the time I have spent with Strategi have left me with some views that I feel need to be shared with those advisers who are looking to take the easy route and not want to become an AFA.
Please don't take the messages the wrong way. They are designed to give you a valuable insight into what is actually happening and the opportunity it creates for those advisers who take action now and get their education and compliance processes squared away by mid 2010.
Start the education journey right now!
If you do not have a Diploma in Financial Planning and no CFP/CLU, then you have a fair amount of study to do. Sure, you may elect to just pay the money and do the challenge tests and in due course pass each unit standard and get the right ticks and qualify with the Level 5 National Certificate in Financial Services. This process may cost you under $3000 plus GST which is a significant saving from the estimated $6000 plus GST one would need to pay to do all the training courses. However, you will possibly be cheating both yourself and your clients by not looking at the Level 5 qualification as an opportunity to refresh your knowledge and skills.
I have been a practicing financial adviser for over 30 years and I thought I knew everything there was to know about the selling/advising on insurances and investments. However, these courses are an absolute eye opener. A fresh approach has been taken to the content and the delivery methods and the trainers are all skilled operators in their own right. The world has changed and in particular the expectations of clients have changed yet I was operating almost the same way I had operated in the past.
It is not until you do these courses (you need to join them with an open mind) and debate issues with the tutor and the other students, that you realise that there may be a better way to do things than what you were doing before. My advice to all financial advisers (both risk and investment) is you do the actual modules. It may cost more money and it may take more time, but the value you will get out of attending these courses is going to come back to you in spades in coming years.
You need to start the courses now whilst there is still room on them. I know that in the case of Strategi, they are currently only rolling out three courses these being:
- Insurance adviser 3 day module
- Standard set A: Industry Knowledge - 3 day module
- Fire and General - one and a half day module.
Their view is they are unable to conduct the other training courses until ETITO has finalised the unit standards and the assessments.
Strategi is gearing up to handle about 2000 advisers over the next 12 months so there will be significant demand for courses. The big bottle neck will come in June when ETITO is scheduled to have available the necessary information to enable the training providers to then roll out the Capstone Knowledge course and the Capstone Professional Practice course. Hopefully before that date, ETITO will have completed the review of the Investment Adviser unit standards and the training providers will be able to provide the training and assessment on those standards.
Who knows exactly how many people within the industry need to attain Level 4 or Level 5. Estimates seem to range from 10,000 to a high of 30,000. If some of these courses are not available until June 2010, then there will be bedlam as advisers try to register their attendance. My advice is to get the courses you can do out of the way by about April of 2010 so you are in a position to be able to do the remaining courses as soon as they become available.
The courses are not that hard
The National Certificate in Financial Services courses are not like a university degree. Sure, there is a great deal of work that is required but the assessments are all well explained, easy to understand and logical. No one is trying to give you trick questions. There is no memory work so you do not have to study and memorise things.
I started the recent Strategi courses with great trepidation and fear of failure as I am over 60 years of age and it was a while ago since I had done any formal academic training. However, I soon became relaxed and fitted into the groove once I realised that all assessments are explained to you in advance and you don't actually fail.
Under the new NZQA system (I had rubbished it when listening to my grandkids talking about 'achieved' and 'not yet achieved' and thought that the A,B, C, and F system should be brought back in), you end up with either an ‘achieved’ or a ‘not yet achieved’. If one does not do well in the assessment, then they are counselled and guided by a Strategi tutor (even tutors these days need to be trained) and given the opportunity to re-sit the assessment. When it is me being assessed, then I quickly realised that the new NZQA system is really good for old codgers like me!
My advice is to do the courses. You will pass even if it takes a little longer for some of you. The assessment process is actually as much a part of the overall learning experience as is the actual time on the courses. I have now completed a formal Level 4 course that makes me a qualified trainer and assessor. I never realised before attending this course that there was such a science behind the learning and the assessment process. It is all about the education process and not about failing students. Therefore, embrace the new world and do the courses and enjoy what you learn.
Become an AFA
The consumers of today want to and expect to deal with a qualified professional and not just a product sales person. These consumers are often time poor and may want to seek advice on their total financial circumstances.
If you are only registered or else choose to only be qualified to Level 4, then you could quickly reach a situation where you are in a meeting with a client and before you know it, you have strayed beyond the level of what you are registered to provide advice on. I am sure you don’t want to be in a situation where you have to say to the client, "Sorry we have to discontinue this discussion as I am not authorised, competent or trained to give you advice on Kiwisaver or any product other than what my QFE sells. I am simply a product seller and what you really need is a financial adviser who is authorised to give you advice on a wide range of products.”
I have been in meetings in recent weeks where advisers have said that they only sell Cat 2 products so there is no need for them to become an AFA. My advice is to think again. It may be true that all you sell today is Cat 2 products but what about tomorrow? All businesses evolve and your business will likely evolve as well, so it is prudent to up-skill yourself now.
Others are thinking of just doing Level 4 rather than doing Level 5. My advice is that is a big mistake. Now that I have been involved as a student on these courses, I realise that even a Level 4 course involves a great deal of time and unfortunately, there is limited ability to cross credit your Level 4 course towards the Level 5 course. For the small additional investment in time, my advice is for all advisers to go for the Level 5 courses as this is where you will need to be in the fullness of time.
I am also of the view that whatever level of qualification you achieve over the next 12 months, then it will not be enough. There is a strong move around the world to see the educational qualifications of financial advisers raised to a higher level than what it is today. Expect to spend the rest of your financial advisory career doing some form of up-skilling or formal maintenance of current skills. This is the new world in which we live. There is no longer any such thing as a ‘constant’. Everything changes so we just need to embrace that change and regularly go back to school to get updated.
I do not want to get into the debate about whether an adviser should join a QFE or become authorised directly with the Securities Commission. For some advisers (eg: employees of a QFE) there is just no choice. They will have to join a QFE as their employer will be a QFE. For others, their age and stage in life and where they want to position their business for the future, will dictate whether they join a QFE or go it alone. Which ever way you go, my advice is to pitch yourself at the highest level possible and obtain the educational qualifications and adopt the business practices that enable you to be an AFA even if operating under a QFE.
Summary
The above comments may be construed by some as being the ramblings of an ‘old timer’. However, I am genuinely excited by the changes that are happening in the industry and the opportunities these changes create for those advisers sufficiently entrepreneurial and motivated to seize them. The changes in front of us may seem huge to some advisers but if you seek good advice and attack the changes with a positive mental attitude and above all else, start right now ( don’t delay), then you will reach December 2010 and be ready for the new regulations.
In years to come, I am sure many of us will look back and say “what was all the angst about? Our business is now bigger and more profitable than what it was in 2009 and a large part of that growth can be attributed to regulation and it prompting us to make the changes we should have made a number of years ago.”
Let’s go forth and embrace 2010 with a positive attitude and show the Government and the public that we are the professionals we have said we are.
Warrick Funnell
Moneyweb
