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Proposed minimum standards of competence, knowledge and skills for authorised financial advisers released

29 October 2009

The Code Committee for Financial Advisers (Committee) has released a consultation paper on the proposed minimum standards of competence, knowledge and skills for Authorised Financial Advisers (AFAs).  This is the first of its consultation papers on the minimum professional standards that will apply to AFAs once the Financial Advisers Act 2008 comes into force (which is expected to be 1 December 2010).

The Committee has anticipated that different standards will apply to different AFAs depending on the nature of their business.  At this stage, the different adviser business categories are:

  • AFAs who provide financial adviser services on an unrestricted basis

  • AFAs who provide financial adviser services only to wholesale financial service providers

  • foreign regulated AFAs, and

  • AFAs who are involved only in investment transaction activities.

The consultation paper sets out 9 proposed qualifying standards for AFAs who advise on an unrestricted basis (including the National Certificate in Financial Services (Financial Advice) (Level 5) (National Certificate) and 8 alternatives), and a relatively “light handed” single standard for AFAs who advise only to wholesale financial service providers. 

Chapman Tripp partner Tim Williams and principal Penny Sheerin noted the omission of any university commercial degrees or any form of relevant foreign qualification, and believe that the class of permitted qualifications needs to be expanded.

The paper does not include proposed standards for foreign regulated AFAs or those involved only in investment transactions.  

The paper notes that the minimum standards are likely to be raised or broadened in the future (in particular, higher minimums may be developed for particular classes of AFAs, such as financial planners), but there will be further consultation on changes.

The paper explains that advisers will need to be assessed against any unit standards they are required to attain. 

“In all cases, AFAs would need to have passed some group standards under the revised National Certificate, the very least of which is a standard relating to knowledge of the Code” said Mr Williams and  Ms Sheerin. 

Assessment will commonly be in the form of examination, workplace evidence or an interview with an assessor (or a combination of these), with ETITO as the primary assessor.  The Committee has recognised that financial advisers who have been working in the industry for a long time may be able to demonstrate their competence without obtaining further formal training, but assessment will still be required.

The Committee has put forward a number of particular questions for submission, including:

  • whether certain groups of financial advisers should be exempt from completing the revised National Certificate

  • whether the 8 proposed alternatives to the National Certificate are appropriate

  • whether the division between wholesale advisers and unrestricted advisers is appropriate, and

  • what the definition of a “wholesale” adviser should be.

The Committee is aiming to release a draft Code, setting out all the standards for AFAs (including those relating to ethical behaviour, client care and continuing professional training), by early 2010. 

A copy of the consultation paper, which includes details on how submissions can be made, is available here. Submissions are due by 5.00pm on November 13, 2009.

For further information, or help with your submissions, please contact any of the lawyers featured.

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