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  4. Financial Markets Authority AFA Update: Issue # 5

Financial Markets Authority AFA Update: Issue # 5

Page last updated: 5 Mar 2012

How we'll monitor competence, knowledge and skills

Most AFAs will now have begun their first CPD period. The CPD requirement supports the requirement for you to have the competence, knowledge and skills you need to provide the financial adviser services you offer (Code Standard 14). It will help you to deliver advice or services that are suitable for each client. When looking at whether an AFA is meeting the competence requirements of the Code of Professional Conduct, these are some of the factors FMA will look at:

1. Whether an AFA's files and the services they have provided show they are competent in practice

2. Whether the AFA's development plan and CPD undertaken specifically relate to the financial adviser services the AFA provides or intends to provide

3. That an AFA can explain how they have identified what development is needed to maintain competence, including maintaining up-to-date product knowledge
4. That an AFA can explain the process followed in circumstances where they do not have the required competence to provide the service - such as referral to an appropriately qualified AFA.

You must have a professional development plan and a record of your CPD activity.
Remember, CPD, is defined in the Code and:
• Is about hours, not 'credits'
• Needs to be recorded by you (with third party verification for structured training)
• Can be provided overseas if the training meets your learning needs
• Can include structured training which is part of a structured programme of a QFE, DAO or professional body even if you are not part of the group managing the training.

Make sure that you are familiar with the Code. Code standards relating to competence are standards 14 to 18 (pages 19 - 24 in the booklet format of the Code of Professional Conduct booklet - order a copy).
For more information about CPD on our website see:
• Your obligations/AFAs/CPD
• Monitoring tips and hints

How care, diligence and skill applies in insurance and credit advice

The obligations to exercise care, diligence and skill and not act in a way that is misleading, deceptive or confusing apply to all people who provide financial adviser services.

We have added information to our website to show some examples of how we consider these obligations apply to:

• Advice on insurance including payment protection insurance
• Product replacement advice - for example, replacement of insurance policies or debt consolidation

Consultation: Guidance note effective disclosure

FMA is currently consulting on draft guidance on how to prepare and present prospectuses and investment statements. Financial advisers have a key role to play in explaining the key features, risks and benefits of investments to their clients based on the information provided by issuers in investment statements and registered prospectuses. As described in FMA's Code 6(d) guidance note, we expect AFAs to consider the financial product's registered prospectus and investment statement in order to recommend a product.
Documents that are written and presented in accordance with the guidance will help advisers to better understand the features, benefits and risks of the product and will help advisers to help clients meet their needs. We are particularly interested in practitioner feedback on whether the proposed guidance will assist with interactions with clients. We have asked a series of question in the consultation document and we encourage advisers to make a submission at consultation@fma.govt.nz
Submissions are due by 9 March.

Canterbury financial advice service

Around 40 Canterbury based AFAs have volunteered to provide a free financial advice service for red zone residents.
Set up with the input and support of Canterbury based AFAs, the service provides residential red zone property owners with a professional one-on-one consultation to help them work through the financial decisions around the Government's payment offer and options for making best use of the payout.
The Commission for Financial Literacy and Retirement Income who is co-ordinating the initiative has commented on the professionalism of the AFAs involved. Protocols around the type and limits of the advice they'll provide at the initial meeting have been agreed and the AFAs involved in the initiative are subject to usual legal and regulatory obligations.

AFA Update emails - alerting you to your obligations

This periodic email provides information, guidance and feedback to help you meet your obligations as an AFA. It is not intended to be an exhaustive list of all AFA obligations on the topics discussed. Please see our website for further resources and information available for AFAs.