Code summary

Draft Code standard

Overview of standard

Section

An Authorised Financial Adviser must place the interests of the client first, and must act with integrity.

An AFA is required to give advice only within the scope of the AFA’s financial adviser services, as advised in writing. An AFA is not required to consider or provide financial adviser services in relation to financial products or matters that are not within that scope in order to comply with this Code Standard

Section C.

Ethical behaviour

An Authorised Financial Adviser must not do anything or make an omission that would bring or would likely to bring the financial advisory industry into disrepute.

Prohibits conduct that would undermine public confidence in the professionalism and integrity of the financial advisory industry. However,does not prevent someone from commenting in good faith on the business or actions of another financial service provider

Ethical behaviour

An Authorised Financial Adviser must not state or imply that the Authorised Financial Adviser is independent, or that any financial adviser services provided are independent, if a reasonable person in the position of a client would consider that the Authorised Financial Adviser or the services provided are not independent

Examples are provided as to when and when not independence can be stated

Ethical behaviour

An Authorised Financial Adviser must not borrow from or lend to a retail client.

This does not prevent an AFA from entering into financial arrangements on behalf of a client as the client’s agent to meet settlement obligations in relation to financial products

Ethical behaviour

An Authorised Financial Adviser must not provide financial advice to a retail client in relation to a financial product that is not offered to the public if the Authorised Financial Adviser is a related person of the product provider of that financial product

Examples when this code does not apply are included i.e. financial product is appropriate and client is aware of relationship

Ethical behaviour

An Authorised Financial Adviser must behave professionally in all dealings with a client, and communicate clearly, concisely and effectively.

An AFA must:

provide only services that the AFA is competent , knowledge and skill to provide
provide the services/obligations in a timely way
transparently manage any conflicts of interest that may arise in providing the services
recommend only financial products that have been analysed properly by the AFA or a third party upon whose analysis it is reasonable for the AFA to rely
Transmission of financial advice: an AFA must take reasonable care to ensure that the person providing the financial advice has an appropriate level of competence, knowledge, and skill

Section D.

Client Care

An Authorised Financial Adviser must ensure each retail client is provided sufficient written information to enable the client to make an informed decision about whether to use the Authorised Financial Adviser’s financial adviser services and/or to follow any financial advice provided by the Authorised Financial Adviser.

Minimum information includes:

scope of services including limits
competence including qualifications and experience
fees, and any other payments and when payments are payable
arrangements that prevent independence
details of any benefits received
internal complaints handling process;
how a client may make a complaint conflicts of interest and arrangements to man

Client Care

When providing a personalised service to a retail client an Authorised Financial Adviser must take reasonable steps to ensure that the personalised service is suitable for the client. The Authorised Financial Adviser must also provide a written explanation to the client of the basis for any financial advice provided as part of the personalised service, and of the risks and potential benefits involved in following that financial advice.

Only required to determine suitability based on the information provided by the client and information otherwise known. However, reasonable enquiries must be taken to ensure an up-to-date understanding of the clients financial situation, needs, goals, and tolerance for risk.
A client may:
- decline to provide some or all of the information required
- instruct AFA in writing not to determine the suitability of the personalised service provided
AFA must not influence a client to opt out although an AFA may point out a customers entitlement to opt out

Client Care

When providing a class service to a retail client, an Authorised Financial Adviser must provide an appropriate statement as to the limitations of the service provided.

must take reasonable steps to ensure the client is aware that the service does not take into account the client’s financial situation / goals

Client Care

An Authorised Financial Adviser must ensure there is an appropriate process in place for resolving client complaints in relation to the Authorised Financial Adviser’s financial adviser services.

In addition to external disputes resolution scheme

Client Care

An Authorised Financial Adviser must record in writing adequate information about the financial adviser services he or she provides.

Types of documents from adviser and to adviser that must be kept are listed
Must comply with the Privacy Act

D.
Client Care

An Authorised Financial Adviser must ensure that records of all information and documents required under this Code are kept for a minimum of 7 years.

Electronic form is acceptable

D.
Client Care

Before providing a financial adviser service, an Authorised Financial Adviser must have the competence, knowledge, and skills to provide that service.

Code Standard 13 applies in addition to the requirements of Code Standards14 & 15
must be able to demonstrate t a reasonable basis for believing you have competence, knowledge, and skills

Section E.
Competence, Knowledge and skill

An Authorised Financial Adviser must have a knowledge of the Act, the Code, and other legal obligations relevant to the operation of the Authorised Financial Adviser’s practice as a financial adviser (including relevant consumer protection laws), that is adequate for the proper operation of that practice.

Must attain Unit Standard set B relating to the code

E.
Competence, Knowledge and skill

To be an Authorised Financial Adviser, a financial adviser must attain the Unit Standard Sets within the National Certificate in Financial Services (Financial Advice) (Level 5) that are relevant to the financial adviser services provided by the AFA. For the purposes of the Code, an Authorised Financial Adviser is deemed to have attained a particular Unit Standard Set where the Authorised Financial Adviser has attained an alternative qualification or designation to that Unit Standard Set specified in the Code’s Competence Alternatives Schedule

An AFA who has attained Unit Standard Sets A, B, C, and D of the National Certificate is not restricted in the range of financial adviser services the AFA can provide, subject to Code Standard 13
may provide financial adviser services without having attained Unit Standard Set D if the AFA has attained Unit Standard Set E and the financial products that might be included concerned do not include any Category 1 products

E.
Competence, Knowledge and skill

An Authorised Financial Adviser must maintain and keep current a professional development plan for each CPD period

Identifying areas for improvement, how these will be closed, & details of courses training, workshops, seminars

Section F.
Continuing Professional Training

An Authorised Financial Adviser must undertake sufficient continuing professional training to maintain the Authorised Financial Adviser’s competence at a level appropriate for the financial adviser services the Authorised Financial Adviser provides or intends to provide, and keep up to date with developments relevant to the Authorised Financial Adviser’s practice.

Minimum 20 hours, with 10 structured
Appropriate records must be kept

F.
Continuing Professional Training

Competence Alternatives schedule

Section G

Definitions Schedule

Section H

Updated category 1 & 2 product listings

4/08/2011

The new legislation has categorised financial products into two categories (Category 1 and Category 2), and sets out which type of adviser is qualified to advise and sell. Many advisers are wondering if the products they sell or have on their books are Category 1 or Category 2 products.

Asset Magazine - A Dummies Guide to QFEs

18/01/2011

Asset Magazine look at the QFE space and what it means for advisers.

This article outlines what a QFE is and what options there are for advisers in the new regulated environment.

Asset Magazine - QFE Article Dec 2010

When do financial advisers have to register?

19/11/2010

After consultations with the Ministry of Economic Development this morning, we received clarification on who needs to be registered by 1 December.

Sovereign takes the lead in a new regulatory world

16/11/2010

Sovereign is embracing legislation that will set new professional standards for financial advisers by applying to become a Qualifying Financial Entity (‘QFE’).