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FINANCIAL ADVICE
Information for financial advisers

The top priority for advisers is to get their skills and competence up-to-date. This is outlined below.

The Act aims to promote good advice and encourage confidence in the professionalism of advisers. It does this by establishing a competence framework that involves industry and educators.

Consumers need to be confident that the financial adviser they engage is capable of delivering the type of service they provide.

The new law imposes on any person performing a financial adviser service an obligation to exercise care, diligence and skill. This general obligation applies to investment advisers, financial advisers and to others who deal with certain financial products.

All financial advisers will be required to register during 2010. Advisers who give advice on more complex products (known as Category 1 products) must also be authorised and meet specified competence levels. Financial advisers are encouraged to understand what is required of them to meet the provisions of the Act.

Financial advisers are divided into three types, depending on the nature of the advice given and whether they work for an organisation that becomes a Qualifying Financial Entity.

Three types of financial advisers

1. The Authorised Financial Adviser: an estimated 5000 people currently working as financial and/or investment advisers will need to be registered as Authorised Financial Advisers (AFAs).

Competence standards and rules of conduct for AFAs will be set in a Code of Professional Conduct, to be developed by a Code Committee.

Once the code committee has established the conduct rules, all AFAs will be required to demonstrate their competence in order to become authorised.

2. Advisers working in large institutions: up to 15,000 people working for banks, financial institutions or other Qualifying Financial Entities will also be required to have received appropriate training. This training will need to be measured against an externally accredited standard. The entity has an obligation to ensure that its employees and agents have the competence necessary to exercise reasonable care, diligence and skill in their financial advisory work.

In most cases these advisers will not need to be individually registered provided the entity they work for registers as a Qualifying Financial Entity.

3. Registered advisers: approximately 3000 advisers described as "category two product advisers," because of the type of products they advise on, will also be required to be registered but not authorised. Category two products include call debt securities, bank term deposits and many insurance and consumer credit contract products.

All registered advisers are required to exercise appropriate care, diligence and skill.

Training requirements

1. For Authorised Financial Advisers
Training requirements for AFA will be determined by the Code Committee in 2010. Industry-developed competence standards already exist that are a good starting point for advisers who want to update their training.

In particular, the financial industry training organisation ETITO has recently developed the National Certificate in Financial Services (Financial Advice) (Level 5). This qualification is intended for those who:

• Give personalised and specific advised based on needs analysis of a wide range of data
• Determine appropriate methods, make recommendations and lead the client, based on this analysis
• Have full responsibility for the nature, quantity and quality of outcomes
• Possess a broad knowledge base with a substantial depth in some areas
• Work for the client
• May specialise in investment advice, insurance advice or both.

To view the qualification outline and structure please follow the link below:
www.nzqa.govt.nz

2. For advisers working in large institutions
Financial advisers working in banks or insurance companies are advised to ask their human resources department about in-house training.

3. For category 2 - registered advisers
These financial advisers are encouraged to upgrade their competence to help ensure that they can operate with the care, diligence and skill required for their work. More information about appropriate training course can be obtained through the professional organisations that represent financial advisers.

See also

- Introduction
- For consumers
- For the financial sector
- For education institutions
- Consultation
- Frequently asked questions