On 20 April 2009, the Securities Commission released their discussion document titled Staff paper on authorised financial adviser competence. This paper asked seven pivotal questions and reading between the lines, it appears the Commission is keen on the minimum standard for becoming an authorised financial adviser (AFA) to be the Level 5 National Certificate.
The Securities Commission should be applauded in a number of areas. Firstly, they have taken the initiative and asked for industry feedback prior to the Commissioner for Financial Advisers being appointed. This shows they are keen to see regulations enacted sooner rather than later. Angus Dale-Jones (Director Supervision) knows what he is about and I believe he should keep steaming ahead as far as legislation will enable him to do so. He can be the de facto or pseudo Commissioner until such time as the ‘perfect person’ has appeared. We don’t want to see the industry stand still whilst the new Commissioner recruitment drive is still underway.
Secondly, the Commission is setting a realistic benchmark for adviser competence. Level 5 is easily achievable, it is relatively easily measured and it is a practical qualification. As Leonie Wallwork from AdviserLink has previously mentioned, experienced advisers can undertake a ‘gap analysis’ process, then undergo the ‘fast track’ process to obtain their certificate.
Here is my view of how the AFA process could work:
- A number of organisations other than just AdviserLink become accredited trainers and assessors capable of administering all the requirements of the Level 5 National Certificate.
- All advisers who plan to provide advice on personal life insurance, and/or investment (this includes KiwiSaver) should start down the Level 5 National Certification process.
- The Diploma in Financial Planning, plus CFP/CLU, should not be regarded, right now, as being an alternative qualification to the Level 5 National Certificate. The Diploma, plus CFP/CLU, are qualifications all advisers should ultimately aspire to, but as for right now, they are different to, rather than necessarily being better than, the Level 5 National Certificate. We need to have a measurable benchmark, and Level 5 should be that benchmark. It is recommended that by the end of 2010, universities need to have altered their diploma course content so that it includes Level 5 criteria and then goes beyond Level 5 with the amount of theory it provides.
- AFAs will receive some form of registration certificate that will list the areas of competence in which they have been trained to provide advice on. Each year, the certificate could be updated to reflect further competencies attained by the adviser. It is envisaged advisers would need to list these competencies on their disclosure statement. Possible areas of competency could include general financial planning (investment and personal insurance), foreign pension transfers, leveraged products, sharebroking, alternative products, business assurance, general insurance and direct property. This list is not considered definitive at this stage and no doubt, industry debate will assist the Securities Commission to better refine what are specific competencies beyond that of being the general practitioner.
- The Level 5 National Certificate should be assessed via examination and a portfolio of evidence. Ideally, the portfolio of evidence would be assessed in conjunction with a site visit to the adviser practice, to gain comfort that what is being submitted is truly representative of what the adviser is actually doing.
- Where an adviser fails the examination, they should be given the opportunity to re-sit within two weeks. If the adviser does not pass the test the second time or their portfolio of evidence/onsite visit is deemed to be a ‘fail’, then the adviser needs to work under supervision. This supervision needs to be undertaken by an entity that is neither the employer of the adviser nor a peer of the adviser. The supervising entity needs to be registered with the Securities Commission and the supervision period should be for a minimum of three months, and the supervising entity needs to assess a minimum of six client files over that three month period.
- I believe that advisers who pass the baseline assessment (Level 5), but do not meet the requisite ‘top up’ requirement for a particular class of work, should be allowed to practice as AFAs for a period of six months while they develop the additional skills.
- QFEs should also be forced to adopt National Qualification Framework (NQF) standards for their members. This is likely to be Level 4 National Certificate. It would be unacceptable for different baseline educational/competency standards to apply to different QFEs. If all members of a QFE obtain Level 4, then it is a qualification they can take from employer to employer.
- The time has come to stop talking about us becoming professional and being regarded by the public as being professional. It is now time to take action and step up to the plate. Level 5 National Certificate is a suitable baseline qualification and, for those who already hold a Diploma or CFP/CLU, then it should not be hard to identify where a bit of remedial training is required and then undertake that training. We have nothing to fear by agreeing to a realistic competency standard and then stepping up to attain that standard.
David Greenslade
BA, MBA, Dip Mgt, Bus Studies (PFP), AFNZIM
Managing Director
Strategi Limited
