1. Compliance
  2. Authorised financial advisers
  3. Your on-going obligations
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Authorised Financial Advisers

Your obligations

If you are an authorised financial adviser (AFA) you must comply with a number of obligations when providing financial adviser services. These include:

Register on time

You must annually renew your registration on the Financial Service Providers Register and notify the Registrar of changes. You must be a member of a dispute resolution scheme, if providing services to retail clients.

Meet your authorisation conditions

An AFA must comply with the terms and conditions of authorisation which will include:

  • standard conditions subject to any modifications that the FMA considers appropriate
  • terms and conditions specific to the AFA.

The standard conditions include requirements for the AFA to maintain an adviser business statement, provide an annual confirmation and to notify us of significant matters.

Variation of terms and conditions

Most terms and conditions will remain in place for the term of the authorisation. The conditions can only be varied during this time in the circumstances outlined below

Situation

Section of the Financial Advisers Act

On application by an AFA (if approved by the FMA)

s55A(1) and (2)

If they are reporting or accounting standard conditions. Changes are subject to consultation

s147A(3) and 147E

For other standard conditions, in limited circumstances, such as in response to an emergency or where necessary to avoid the defeat of the purpose of the Financial Advisers Act. Changes are subject to consultation

s147A(3)(a) to (e) and 147E

If the business of the AFA has changed in such a way that there is a material risk to consumers; and/or the AFA has been or is involved in market practices that are in material respects inconsistent with the purpose of the Act

s55A(3)

On an AFA's default

s59(2)(d)

If an AFA applies to renew their authorisation new terms and conditions may apply.

Follow theCode 

The Code of Professional Conduct sets out minimum standards and applies to all AFAs from the date of authorisation and while they remain authorised. Review a full copy of the Code here.

Tell your clients what's important

You must make both a primary and secondary disclosure when providing personalised services to retail clients. The principle behind disclosure is to provide the essential information your client needs to make an informed decision. It must not be misleading, deceptive or confusing. Any additional information you decide to provide to a client must not be misleading, deceptive or confusing either. For example, if you decide to provide accompanying information about your qualifications, make sure your client understands the relevance to the service they are considering.  Find out more on your disclosure obligations.

Continuing professional development

AFAs must meet certain minimum standards for continuing professional development. These are set out in Code Standards 17 and 18 in the Code of Professional Conduct for Authorised Financial Advisers.

AFAs have an obligation to be competent when they give advice (Code Standard 14) and must maintain and keep a current professional development plan (PDP) for each CPD period.

The CPD requirements for AFAs are not prescribed in detail and are instead principles-based. An overarching principle of CPD is that an AFA has discretion to undertake professional training that best meets their individual needs. 

7 tips to get the most out of your PDP

1. Personalise your plan

Ensure your professional development plan (PDP) is personalised to you.  Think carefully about the full range of skills you need to have to be a successful AFA. For example think about what technical skills you want to improve on or gain as well as key business and client management skills.

2. Think strategically and ask yourself these questions:

  • What was your experience like with clients last year?
  • What do you think you could have done better?
  • Were there any areas you didn’t feel confident advising on that you would like to include in your practice?
  • What learning opportunities are available that will add value to your clients?
  • What will make you a better AFA and help ensure you continue to be one?

3. Review your PDP regularly

Review your plan on a regular basis, eg, quarterly.  When you start, your plan is likely to be idealistic, so it’s good idea to reflect on how you’re tracking and any new training opportunities you’ve identified. This helps your plan becomes a living and breathing document.

4. Keep it simple but relevant

A PDP only needs to be a few pages.  Include your reasons for wanting to undertake selected training but take care that it’s not so granular that there’s no room for flexibility. We expect it to be a thoughtful and insightful document and cover the matters required in Code Standard 17.

5. Identify any gaps in your competence, knowledge, and skills

When we monitor AFAs, we focus on whether you have noted in your PDP any competency gaps or areas for improvement and what steps you are taking to address these. Code Standard 17(d) requires an AFA’s PDP to take into account the “minimum level of competence, knowledge, and skills an AFA is required to be able to demonstrate to provide that service under Code Standard 16” – with a view to identifying any areas for improvement or gaps in competence, knowledge, and skills when compared with that level. This may particularly apply if you’re relying on an old competency pathway that’s no longer available for new authorisations.

6. If you’re relying on an old competency pathway that is no longer available

If you think you need to up-skill or strengthen your competency in certain areas as a result of differences between an old competency pathway and a Component of the New Zealand Certificate in Financial Services (Level 5), take the following steps:

  • Write in your PDP if you are relying on an old competency pathway that is no longer available.
  • Identify and write in your PDP any learnings that you think you need to address to bring your competency up to the minimum level under Code Standard 16. To do this, simply compare the learning outcomes for each of the relevant Unit Standards of the Components of the New Zealand Certificate in Financial Services (Level 5) with your current competency, knowledge and skills. For any identified new learning outcomes or areas for improvement, use your professional judgement to determine how best to achieve this.  For example, complete a bridging course offered by an educational provider, complete the relevant unit standards, or undertake some other form of structured professional development.
  • Write in your PDP the reasons why you believe you have the competence, knowledge and skills required to provide the services that you intend to provide (notwithstanding any areas for improvement or gaps you have identified). See Code Standard 14.

7. Don’t offer services you don’t have capability to provide

You must have the competence, knowledge and skills to provide any particular services that you offer.  Therefore think honestly about whether you have the necessary capability to provide them.  If not, then don’t offer that service, and tell your clients you are unable to provide that service. Make sure your scope of service documentation is consistent with this.

Update your adviser business statement (ABS)

The AFA ABS Guide was last updated in January 2015.  The main changes from the previous version of the guide have been to reflect recent changes to the Code and the addition of information regarding the eligibility criteria for AFAs providing Personalised DIMS under the Financial Advisers Act.  

Advisers providing personalised DIMS will need to ensure that their ABS contains all of the required information with respect to personalised DIMS.  All other advisers should be mindful of the changes brought about by the amendments to the Code when they next update their ABS.

Read the AFA adviser business statement guide.

Under the standard conditions of authorisation, AFAs must maintain a current written adviser business statement (ABS).  Each year, you must confirm to us that your ABS is current through the annual AFA information return.

You do not need to supply us with a copy of your ABS or specify any changes you have made to update your ABS.  However we may ask for a copy of an ABS at any time to assist in monitoring.

Make sure your advertisements are clear and true

A financial adviser must not advertise a financial adviser service in a way that is misleading, deceptive or confusing. This is in addition to the general requirement that a financial adviser's conduct in providing a service must not be misleading or deceptive (See sections 35 and 34 of the Financial Advisers Act (FAA).

If you’re a financial adviser, the fair dealing provisions of the FMC Act will apply to you. These are in addition to your obligations under the FAA.

These general obligations apply to all financial advisers including registered financial advisers. As well as traditional forms of advertising (e.g. radio, press, TV advertisements), advisers also need to consider whether messages on websites, business cards, signage and other communications  might be seen as an advertisement. This will depend on the particular wording involved and message conveyed.

AFAs have additional obligations relating to advertising. Under AFA standard condition 7 AFAs must not at any time state or imply the FMA has endorsed or approved the AFA's business, advice, or solvency, or any other agreements or business arrangements. 

However this does not prevent AFAs from factually disclosing or otherwise representing they are an AFA.  For example, AFAs can display their AFA certificate on an office wall or website or state on business cards that they are an AFA.

AFAs must also state on advertisements for financial adviser services that a disclosure statement is available on request and free of charge. (See section 30 of the FAA and the definition of advertisement at section 5).

Complete your AFA information return annually

The information return is a reporting requirement contained within the regulatory reporting guide (RRG). The RRG sets out the periodic and other reporting, accounting and notification requirements for AFAs as required under the standard conditions for AFAs.  

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