1. News
  2. FMA Update
  3. AFA Update archive
  4. Financial Markets Authority AFA Update: Issue # 10

Financial Markets Authority AFA Update: Issue # 10

Are you currently providing Discretionary Investment Management Services (DIMS)?

FMA is in the process of conducting a thematic monitoring project focused on AFAs who are licensed to provide Discretionary Investment Management Services. There are currently around 1,300 AFAs licensed to provide these.

The purpose of the project is to:

• Get confirmation from AFAs licensed to provide Discretionary Investment Management Services that they are currently providing this service to clients.

• Monitor a selection of AFAs who are licensed to provide Discretionary Investment Management Services in order to:

  • ascertain if the AFA is currently providing Discretionary Investment Management Services to clients
  • identify how these services are being provided
  • identify any potential compliance issues that may be common across AFAs
  • provide specific monitoring feedback to individual AFAs that have been visited by FMA.

Our monitoring approaches range from reviewing the AFA’s Adviser Business Statement (ABS), to telephone interviews and monitoring visits.

A report on our findings and guidance on DIMS will be published in April.

AFA Monitoring for October to December 2012

As signalled last year, the focus and intensity of FMA’s monitoring work continues as we approach the end of our second year of operation under the Financial Advisers Act 2008. Our overarching focus is on raising standards of good conduct, ethics and integrity amongst market participants. Where activities have been subject to regulation for some time, we have higher expectations that participants will operate above the bare minimum required, and that senior management will sponsor a culture of integrity and good conduct.

As part of FMA’s ongoing monitoring of AFAs, we review AFA’s compliance with the conduct obligations set out in the Financial Advisers Act 2008.

Of particular relevance this quarter are sections 33 and 34 of the Financial Advisers Act 2008:

  • All financial advisers must exercise care, diligence and skill
  • All financial advisers must not engage in misleading or deceptive conduct

View a copy of our latest monitoring report here.

Giving KiwiSaver advice

FMA has just launched a consumer brochure to help advisers explain to New Zealanders the different types of services they may receive when investing in KiwiSaver schemes or considering changing between schemes or funds. The brochure can also help advisers explain their services to their clients.

The brochure describes the three different types of services:

• No advice – provision of information only - no advice is provided;
• Class Advice – advice on what is usually suitable for people in a group or class; and
• Personalised Advice –advice tailored to the client’s personal circumstances.

Many advisers only offer one KiwiSaver scheme. The brochure encourages customers to find out if their adviser is able to advise on only one scheme, or can compare schemes.

Understanding the service they receive is a key step to helping customers make informed decisions about their money.

The brochure responds to feedback received during consultation on FMA’s Guidance Note: Sale and Distribution of KiwiSaver and from our AFA Survey. We now expect all distributors to have taken account of the Guidance Note in their distribution practice and will review distributors approach to the guidance in our monitoring and surveillance work.

We invite you to download a copy of our new brochure here. Or, if you would like to receive some printed copies, please contact our Customer Service team on 0800 434 566.

FMA’s Compliance Focus for 2013

In February we released our compliance focus for 2013, outlining FMA’s priority areas for monitoring and surveillance over the coming year.

Our document outlines the four major themes which will influence our priorities for 2013. They are: building customer trust; raising standards in existing regimes; embedding new regimes; and KiwiSaver, as well as our overall regulatory approach.

AFAs will find raising standards in existing regimes of particular relevance. FMA’s overarching focus is on raising the standards of good conduct, ethics and integrity, and we expect that where activities have been subject to regulation for some time, participants will operate above the bare minimum required and that senior management will help foster a culture of integrity and good conduct.

We will also be placing significant emphasis on supporting participants and investors throughout the reconstruction of Christchurch.

A copy of FMA’s Compliance Focus for 2013 can be viewed here. If you would like a printed and bound copy please contact Danette Hunter at FMA on danette.hunter@fma.govt.nz.