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QFE rules - could be useless

The focus of commentary on the recently announced QFE rules was on standards. There has been a groundless fear recently that QFEs would be given a pass on the standards required of advisers as their operations might have been viewed as too different to compare directly with those of individually registered or authorised advisers.

But this misses the point.

Unless the rules regarding the definition of financial planning are sorted out none of the supposed benefits of running a QFE will emerge – you can’t have any of the offered efficiencies if as soon as a member of the QFE does a decent needs analysis they have become guilty of doing financial planning and need to be individually authorised.

Whoops.

I doubt if this is what either Lianne Dalziel or Simon Power had in mind. Even the issuer of their own product – say a major bank with its own KiwiSaver and other category 1 products cannot rely on a QFE  with the risk as Angus Dale-Jones recently put it of “being caught by the third leg of the stool – financial planning”.

So you can complain about it being released two days before Christmas all you like, but until we have more clarity on the definition of financial planning, it may not be worth reading at all, as you could simply end up requiring individual authorization for everyone anyway.

Of course some people may applaud that, but its no route to an efficient financial services sector. It's likely to leave us a long way behind Australia, and leave consumers without well-funded QFEs to help foot the bill when something serious goes wrong. 

I think it's time to resolve the last major issue preventing companies and advisers from making proper headway in their plans to get compliance.


Wouldn't it be stupid...risk

Recently I read that a climate scientist, so pissed off with the climate change sceptics, wrote that "...just because 'Could I play for England?' could be phrased as a yes / no question it did not mean the chances were 50/50." He makes a point about debate and risk.

Looking back, we did not find piles of nuclear or chemical weapons in Saddam's lairs. So, why wasn't Iraq more open to inspections? ...and so we bumbled, blustered, and groped for war as a solution to the risk "what if he has got them?" whether you agree with it or not, that's the question as it was put to electorates.

...and now we have a different question of risk. Iran's nuclear programme. If there's nothing up with the programme - why don't they come clean? It looks like history repeating itself. It would be nice, as we come up to Christmas to think it would happen quite so soon. But what if they are developing nukes? what if they have them?


Nothing Wrong With Excellence

In this recent piece on goodreturns we were told that Newpark and Share both support AFA status for their advisers. In the comments Ron Flood wrote about how it was essentially vital for risk advisers to be authorised because they will do a full fact find and needs analysis - anything less was to be a mere salesperson or 'bank teller'.

Although the definition of financial planning is not yet clear, I agree with Ron's comment that this has been the direction of recent comments. I do not think this is wise on the part of regulators and hope that they will revisit it because of the economic efficiency issues. But this is not because I think most risk advisers would be right to opt only for registered status. I think it's great that they should aim for the highest standards. I also think that unless category 2 / registered advisers do exist then there will be no room for differentiation for such a move - which would be a shame. Having said that - it might be wise to get all the proposed rules for AFAs on the table, plus the definition of financial planning before making a final choice. Meanwhile, hit the books, it won't be wasted!