The new system of Authorisation and Certification of Financial Advisers will cleanse the market of unhealthy practices and reinstate public confidence in professionals, experts have said.
The ‘Financial Advisers Act’ 2008, which comes into force today (July 1, 2011) will foster a more regulated system of service delivery by finance advisers, who will be obliged to ‘graduate’ to become ‘Authorised Financial Advisers,’ through a rigorous procedure of Certification.
The ‘Financial Markets Authority’ of the Government will regulate financial advisers, aiming to make the services provided by finance companies, mortgage brokers and other service providers in the finance sector more transparent and accountable to stakeholders and the public.
The regulation, which is a part of the Government’s package of reforms in the finance sector, became a necessity following the collapse of finance companies over the past few years, leaving thousands of institutional and individual investors high and dry.
The law covers financial advisers, mortgage brokers, insurance brokers, stockbrokers, finance companies, credit unions, trustee companies, fund managers, superannuation schemes, card-issuing companies and transactional service providers including foreign exchange dealers.
Auckland based Professional Financial Services Limited (PFSL) Director Ravi Mehta was among the first professionals of Indian origin to become an Authorised Financial Adviser last month.
He said transparency and accountability were twin aspects of the profession that needed reinforcement and reiteration.
“While PFSL has been following these principles combined with honesty and integrity since its inception in 2003, there was a need for regulation of this sector in view of unhealthy trends and practices.
“The purpose of the ‘Financial Advisers Act’ is to promote sound and efficient delivery of financial advice and encourage public confidence in the professionalism and integrity of financial advisers. The procedure for Authorisation would enhance the credibility that our Company has earned over the past eight years,” he said.
Free Dispute Resolution
The new regime protects consumers, putting in place ‘Dispute Resolution Schemes,’ that would allow them to have their complaints investigated free of cost. Prior to the enactment of the statute, complainants were obliged to pursue expensive and time-consuming procedures in law courts.
Insurance and Savings Ombudsman Karen Stevens said the free dispute resolution service was critical to the ‘reformation’ of the finance sector.
“While customers of banks, insurance and savings organisations have had the facility of free dispute resolution since the early 1990s, the concept is new for other financial service providers,” she said.
The new regime distinguishes between ‘Registered Financial Advisers’ and ‘Authorised Financial Advisers.’
“Registered Financial Advisers are not qualified to do Financial Planning. Therefore, as ‘Authorised Financial Advisers,’ we will stand to gain a larger share of the market,” Mr Mehta said.
His Company’s services include solutions covering accounting, taxation, mortgage broking, business loans, financial planning and insurance broking.