FADC rules adviser in breach of code standard, and more daily news

The Financial Advisers Disciplinary Committee (FADC) has concluded that an adviser breached the Code of Professional Conduct for Authorised Financial Advisers. The case was brought forward by the FMA after it begun an investigation on the adviser on 23 August 2019. The adviser, who has name suppression, operated under three different businesses offering financial advice, financial planning, investments, mortgage broking, KiwiSaver, retirement planning, residential property management, and personal and small business tax advice services. Through the FMA investigation, it was found that there were three breaches of Code Standard 15. The breaches were in relation to financial advice, personalised services, and client relationship management provided to three clients. Advisers looking to ensure that their advice processes are up to standard would benefit from our Advice Process Management service.

“The Financial Advisers Disciplinary Committee (FADC) has today published its decision regarding a case brought by the FMA. The case relates to alleged breaches of the Code of Professional Conduct for Authorised Financial Advisers.

It says that "this is a case about breaches of the Code". It is not about the integrity of the financial adviser. "There is no suggestion that she has improperly benefited at the expense of her clients, or that any client has been disadvantaged."

"But, the provisions of the Code are fundamental and adherence to them is always required."

The financial adviser still has interim name suppression, but the decision says she registered as an AFA on the FSPR in 2011. She offers a range of services including financial advice, financial planning, investments, mortgage broking, KiwiSaver, retirement planning, residential property management and personal and small business tax advice (as a tax agent) through her business. She trades under three businesses, one of which is registered on the FSPR from 2011 as an employer or principal of a financial adviser and/or Qualifying Financial Entity.

After an unrelated complaint in January 2018, the FMA took an interest in the AFA, which culminated in a monitoring visit to the premises in May 2019, and a desk based review in July 2019.

As a result of these two visits, the FMA began an investigation on August 23, 2019.

The investigation found that the AFA breached standards 12 and 15 of the Code, which relate to keeping information about personalised services for retail clients, and the requirement to have an adequate knowledge of Code, Act and laws.

The court briefing says that "The breaches are established in respect of three clients, whose identities are permanently suppressed; it consists of the adviser having failed:

  1. to record in writing adequate information about a personalised service provided to a retail client
  2. to demonstrate adequate knowledge of the relevant legislative obligations which result from the term ‘personalised service’."” Click here to read more

In other news

Cigna: Multi-benefit discount offer on Assurance Extra products extended to 28 February 2021

Cigna: Karen Ward appointed as Head of Claims

Cigna: Nicci Johnston appointed as Head of Customer Care

Financial Advice: Ready, Set, Go webinars to begin 27 January 2021

Financial Advice: Trusted Adviser mark to be publicly launched 15 February 2021


Legal and regulatory update for the life and health insurance sector

10 Nov 2020 – The Financial Advisers Disciplinary Committee website has again been amended such that the “Next Hearing” has been changed from 19 Nov 2020 to Thursday, 10 Dec 2020 at 9:00 a.m., with no further information provided other than details of the venue. https://fadc.govt.nz/upcoming-hearings/

6 Nov 2020 – The Privacy Commissioner published on the website details relating to the serious threat to public health or safety exception where the collection, use and disclosure of personal information is needed to combat a serious threat to public health or safety, such as Covid-19. https://www.privacy.org.nz/blog/privacy-covid-19-and-the-serious-threat-to-public-health-exception/

9 Nov 2020 – FSC released a new Disclosure Guide for the financial advice community. https://www.fsc.org.nz/site/fsc1/Reports/Financial%20Services%20Council%20-%20%20Disclosure%20Guidelines.pdf


Legal and regulatory update for the life and health insurance sector

14 Oct 2020 – The Financial Advisers Disciplinary Committee website has again been amended such that the “Next Hearing” has been changed from 2 Nov 2020 to 19 Nov 2020, again with no further information provided other than details of the venue. https://fadc.govt.nz/upcoming-hearings/

14 Oct 2020 – Good Returns reported the launch of the Trusted Adviser mark by Financial Advice NZ, noting that the public launch of the mark is scheduled for February 2021. https://www.goodreturns.co.nz/article/976517649/trusted-adviser-mark-finally-launched.html


Legal and regulatory update for the life and health insurance sector

2 Oct 2020 – Government released the Request for Proposal documents to appoint the next set of KiwiSaver default providers. https://www.mbie.govt.nz/about/news/kiwisaver-default-provider-rfp-opens/

5 Oct 2020 – Department of Internal Affairs posted on its AML/CFT News and Information website information on some of the risks associated with compliance with election financing laws. https://www.dia.govt.nz/AML-CFT-Election-financing-laws

5 Oct 2020 – The Financial Advisers Disciplinary Committee website has again been amended such that the “Next Hearing” has been changed from 5 Oct 2020 to 2 Nov 2020, again with no further information provided. https://fadc.govt.nz/upcoming-hearings/


Legal and regulatory news update for insurance sector

10 Aug 2020 – RBNZ published an amended Insurer Solvency Return and Guidance Note (v5.3) to improve the information provided through projections of solvency. These documents will be in-force from 1 September 2020.

11 Aug 2020 – The Financial Advisers Disciplinary Committee website was amended, changing the next scheduled hearing from 24 August to 5 Oct 2020, with no further details given.


Insurance replacement business - disciplinary actions

Advisers have been disciplined for failures to observe replacement business guidance for insurance, if they are AFAs, and in this case, in a QFE. Link. Reading the article I noted that it was the QFE itself that made the referral. Also, that they failures were mainly record-keeping issues. These are significant, but the comments of the disciplinary committee about harm are important too.


Insurance complaint ruling: wider market comparison expected

The FMA  recently complained about an AFA who provided both advice on a pension transfer and replacement of insurance. The Financial Advisers Disciplinary Committee have heard the case. The part of the decision which relates to insurance is particularly interesting: 

"There is nothing to suggest that his recommendation was supported by analysis, apart from an indicative illustration provided by AIA and the Respondent's emailed statement that AIA was the only insurer who would offer "take-over terms". We do not know whether a fuller analysis would have led to the same conclusion but would have expected a far broader examination of what market options existed for the relevant client, even if that involved different terms. Financial decisions of this type typically involve trade-offs and analysis of those would be an expected and basic element of advice of this type" 

Although I am duty bound to point out that I am conflicted - as I have a financial interest (indirectly) in Quality Product Research Limited, this looks like a strong indication that seeking options, proof of analysis, and comparing the market, are components of insurance advice that the FADC expect. 

There are also parts of the decision that relate to pension transfers which are also of interest, and also relevant to providing insurance advice, particularly where replacement is being contemplated.

Also, aspects of the decision in relation to the fee that the adviser proposed, which was only to be paid if certain actions were taken, is worth reviewing. The FADC did not find that the FMA's complaint was made out, and allowed that although the adviser did have conflicted remuneration it was adequately disclosed. 

You can read the decision at this link