Thursday & Friday of last week were spent at our national Council and Board meeting in Wellington.
I would like to thank all participants at both of these meetings for the constructive discussions and thoughtful consideration and suggestions for action they brought to the table for the benefit of our members and the profession of financial advice in New Zealand.
It is a privilege and a pleasure to Chair the Council meetings in particular as without exception the delegates to this forum from each of our branches are passionate about and committed to improving the standing of our profession as well as providing invaluable input for your Board as to how we can continue to add value to you our members.
One major piece of work that was ratified and adopted by the Council meeting last week was the update to our guiding documents such as our Codes of Ethics and Practice Standards. These updates have brought these documents into line with international best practice standards for the provision of sound financial advice to our clients as determined by the 23 member affiliates of the Financial Planning Standards Board. IFA provided significant input into the formation of these standards through branch and Special Interest Group involvement and I’m pleased to say that almost 100% of our suggested amendments were incorporated into the final document.
The most significant change to our existing documents was that the concept of placing our clients’ interests first ahead of our own was taken from the body of the Practice Standards document and enshrined as the first of our stated ethical principles. So, while there is no change to the standard of care that you our members adhere to when providing advice, this principle is brought to the forefront to demonstrate to our clients that this is what they can expect of an IFA member.
Media and reputation
This leads me to comment on the findings of a survey of financial advisers published in the latest Consumer NZ magazine. These findings and the way in which they have been portrayed in the article concerned are hugely disappointing to all of us involved in the Institute of Financial Advisers.
As members of IFA, we voluntarily subscribe to a standard of professionalism in the provision of financial advice to our clients which differentiates us from non-members.. By virtue of our choice to become members of our professional body, we commit to some key strategic standards and processes:
* adhering to our Codes of Ethics and Practice Standards for the provision of advice to our clients,
* becoming qualified to provide financial advice and to continuing our professional development throughout our careers to ensure that we are able to provide up-to-date and timely advice to our clients,
* a period of practical supervision through our mentoring process to ensure that our client interactions are of a high standard.
If all else fails, we also voluntarily commit to a complaints and disciplinary process that, at present, no other adviser in New Zealand is subject to.
I was approached by Consumer NZ to participate in their expert panel to assess the results of the financial advice provided to their mystery shoppers. Unfortunately I had other commitments on the two days that they needed me and I was very grateful to members Craig Wylie and Tony Cross both from Wellington who stepped forward and gave up a day each of their time to be one of the assessors on the panel.
This is why IFA members concern themselves with the process in the provision of financial advice. The internationally recognised 6-step process of establishing the scope of the engagement, gathering the necessary data and establishing the client’s goals, identifying their current situation, potential problems and opportunities, developing and recommending strategies to meet the client’s needs and goals, implementing the strategies approved by the client and reviewing and revising these strategies and actions regularly, is designed to ensure that the process of providing advice to the client is tailored to not only meet the client’s stated needs and goals but also to identify issues that the client may be unaware of that may prevent them from achieving their goals.
This is also why the provision of the initial financial advice is only the beginning of a long-term relationship with the client. Over time the advice is modified and changed to take into account the changing circumstances of the client. I’m certain that it’s your experience, as it has been mine that our client relationships last way beyond the initial piece of advice and continue for many years for our clients’ and our own mutual benefit. This is one of the most satisfying and worthwhile aspects to being a financial adviser.
There are some misperceptions in the Consumer NZ article and it is also my belief that some of the language used was sensationalist and I’m very concerned about this. I will be trying to engage the Chief Executive of Consumer, Sue Chetwin, and the writer of the article, Susan Guthrie, in discussion this week to provide an IFA perspective on these issues.
We can’t however undo what is now out there in print and this is unfortunate. Fuelling debate only draws more attention to the article and gives it more airtime. It is most disappointing that this article gives the New Zealand public an impression that all financial advisers don’t put their clients’ interests ahead of their own. I know this not to be true of IFA members and I know that we are all working to ensure that we are ready for regulation and that, more importantly, we are all making positive differences to our clients’ financial situation on a daily basis.
I will be working to make this message very clear with a planned and professional approach to media, regulator and stakeholder issues– and not just to Consumer NZ but also to organisations like the Retirement Commission which is another organisation that the IFA fully supports and to whom we have over the years provided much member expertise to assist them to achieve their goal of financially sorted New Zealanders.
Going forward I would strongly recommend that you all read and understand the new standards for provision of financial advice adopted by Council last week. They are available on our website ( www.ifa.org.nz/library/index.php ).
Finally, be assured that the IFA will work with a PR expert in the coming months to differentiate IFA members from other advisers and to build consumer confidence in IFA members in the short and long term.
Code Committee
At our Board meeting on Friday, we were visited by Ross Butler as Chair of the Code Committee, together with other Code Committee members and people from the Securities Commission. In answer to the question as to what our members can do to prepare themselves for regulation, Ross said:
Ensure that you,
* Follow good process
* Have high standards of disclosure about who you are, what you do, how you propose to do it, any conflicts of interest you may have and the way in which you get paid for providing advice.
* Complete a comprehensive needs analysis with your client.
* Are well informed about your market and the environment.
* Marry your client needs with the products or recommendations you make to them.
*Provide your recommendations in writing to your clients with justification for the recommendations you make.
* Keep good records of client interactions.
* Implement recommendations properly.
* Provide ongoing review and monitoring to clients.
IFA already provides you with template disclosure documents that meet these requirements. It is our intention as the Code is written and becomes clear that other templates including for Statements of Advice, will be provided to you as members to ensure that you are able to be fully compliant and to make the provision of good financial advice to your clients easier for you.
Already committed to high standards
As I have mentioned on a number of issues above, you are the financial advisers in New Zealand who genuinely strive to be professional in everything you do. This is the reason you voluntarily belong to a professional body like IFA. It is my absolute commitment to you – as it is for all Board members – that we will continue to do everything we can do to promote that message to all New Zealanders in particular consumers and the regulators.
If there is anything you would like to discuss with me, as ever, please don’t hesitate to contact me.
Lyn McMorran
PRESIDENT
