Minimum standards of competence
All Authorised Financial Advisers (AFAs) must abide by the Code of Professional Conduct. The Code says that before providing a financial adviser service an AFA must have the competence, knowledge and skills to provide that service. AFA applicants must also show that they meet the required levels of competence when they apply.
The National Certificate in Financial Services (Financial Advice) (Level 5) is prescribed in the Code as the minimum standard of competence for AFAs. This qualification is made up of unit standards grouped together into Standard Sets A, B, C, D and E:
- Standard Set A - core knowledge including knowledge of the industry, financial markets, the advice process and products
- Standard Set B (Compulsory) - knowledge of the Code of Professional Conduct and the legislative framework for financial advisers including consumer protection laws
- Standard Set C - professional practice including applying the six step advice process and complying with legislation
- Standard Set D - investment specialist standards
- Standard Set E - insurance specialist standards or residential property lending specialist standards.
These Unit Standard Sets are registered with NZQA on the National Qualifications Framework, providing a nationally recognised, measurable standard across the financial adviser sector.
See The Skills Organisation website.
Proof of competence
The Financial Market Authority will check that advisers applying for authorisation meet the required competence standards.
To become an AFA a person must provide evidence that they have:
- attained the Unit Standard Sets contained in the National Certificate in Financial Services (Financial Advice) (Level 5) that are relevant to the financial adviser services they provide, or
- hold an alternative qualification or industry designation listed in the Code as being an acceptable alternative to a particular Unit Standard Set. These are listed in the Competence Alternatives Schedule in the Code. See further information below about the eligibility sunset.
All advisers seeking authorisation must complete Standard Set B which demonstrates knowledge of the Code and other relevant law including the Financial Advisers Act 2008 and consumer protection law.
Advisers need to upload copies of qualification documents when they apply for authorisation online at Financial Service Providers Register.
For more information see the Code of Professional Conduct for Authorised Financial Advisers and the AFA Authorisation Guide.
Training and competence assessment
The Skills Organisation, the national standards setting body for the financial services industry, makes sure there is sufficient, appropriate training available and manages the competence assessment process for the authorisation of financial advisers. See the The Skills Organisation website for information about training and assessment.
For other information about alternative qualifications, designations and lapsed designations and application requirements read the AFA Authorisation Guide.
What do I do if my qualifications were attained overseas?
The Code does not include any foreign qualifications in the list of alternative qualifications or designations. If your qualification or designation is not currently recognised in New Zealand then you should apply to The Skills Organisation to be assessed and examined against individual unit standards (within the National Certificate in Financial Services (Financial Advice) (Level 5). You can do this without undertaking any additional training; however, it would be wise to first check with The Skills Organisation whether assessment only options are appropriate for you.
Are there any exemptions?
FMA has limited powers to exempt any person, class of person or activities from complying with any section of the Financial Advisers Act, associated regulations or the Code. FMA will limit the use of its powers to cases that meet prescribed statutory criteria, and all exemptions will be based soundly on the policy of the law.
Who is the Code Committee?
The Code Committee was appointed in July 2009 and developed the Code of Professional Conduct for Authorised Financial Advisers.
Why is there an 'eligibility sunset'?
The Code provides relief from attaining certain unit standard sets for advisers who hold other qualifications or designations (see Competence Alternatives Schedule). Some of these competence alternatives are subject to the 'eligibility sunset' which is explained in Code Standard 16.
The sunset clause creates a cut-off date (1 January 2014) after which an AFA who applies for authorisation for the first time will not be able to rely on alternative qualifications (that are subject to the sunset clause) to become authorised. There are clear benefits in having a standardised curriculum, and this is usual for professional occupations. The rationale for the sunset clause is to give course providers time to align their curricular to the National Certificate.
How does the eligibility sunset apply for renewals?
FMA's interpretation of Code Standard 16 is that an AFA who has used alternative qualifications or designations (that are subject to the eligibility sunset) to become authorised, can continue to take advantage of those alternatives. That is, we will not require them to have attained the unit standards for which they, on first application, claimed relief before they apply for renewal of their authorisation.
This interpretation is based on the Code as currently in effect. Future Code Committees may require different minimum competence requirements. This might include whether any competence alternatives for AFAs will remain in the Code, whether AFAs will be able to continue to rely on 'deemed' attainment of unit standards for or beyond their second period of authorisation, or how long AFAs will have to move to any newly prescribed minimum standards.
FMA encourages AFAs to sit the unit standards they have not yet 'formally' attained. For example, preparing for, and sitting Standard Set C, can be a useful practical refresher. It can also be a useful way to fulfil the structured component of your CPD.