Back to finance school

Sovereign CEO Charles Anderson. Photo / Herald on Sunday

Virtually every financial adviser in the country will be back at school in the next few months studying for a qualification which will allow them to stay in business.

Up until now there has been no requirement at all for people giving financial advice to have appropriate qualifications.

No longer. The Government has mandated that those offering advice on financial products of any complexity (that includes KiwiSaver) must qualify as authorised financial advisers.

They must pass the new National Certificate in Financial Services [Financial Advice] or equivalent by December, or exit the industry.

The number of advisers who need to gain the new qualification varies from organisation to organisation.

In some cases, such as insurer Sovereign, which announced its plans for upskilling its advisory force last week, almost all of its 400 SovNet advisers will need to pass some or all of the new national certificate.

Chief executive Charles Anderson said the level of qualification among the SovNet force varied from nothing more than high school exams through to a handful with university degrees.

The new level five certificate - roughly equivalent to a diploma - has been developed by the ETITO, an industry training organisation which specialises in designing national assessments.

The qualification was competency based, spokesman Michael Frampton said.

"What that means is that training is not required if an adviser believes that they are already competent to engage in the assessment process."

But if an online self-evaluation tool released by ETITO in January is anything to go by, the financial advice industry has a long way to go before it meets the new standard.

Of the 850 people who had used the tool, only 50 per cent produced results that would indicate they were ready to sit the qualification, Frampton said.

The certificate involves five groups of unit standards covering:

* Knowledge of the industry, financial markets, the advice process and products.

* Knowledge of the new professional code of conduct, currently being finalised.

* The six-step advice process and complying with legislation.

* Specialist investment standards.

* Specialist insurance standards.

Some are already underway but assessment of all standards starts from June 1.

Officially, the qualification takes around 500 hours' study, but industry players say an experienced adviser could pass it in three to four months of part-time study.

Sovereign has announced it will pay for advisers to study through the Open Polytechnic at a cost of about $2000 each. It will also offer other support such as a team of business development managers to help them with study.

"We will do everything in this process we can short of giving you the bloody answers," SovNet general manager Leighton Langley told advisers gathered at the organisation's conference in Auckland last week.

Sovereign's Anderson said confidence in the financial services industry had hit rock bottom, and it was important advisers fully engaged in the process.

"The regulatory intent is that there will be an uplifting of professionalism of financial advisers, and that's really a lot more than ticking the box."

He estimated the new requirements would result in 20 to 30 per cent of advisers leaving the industry.

However, with the help it was offering advisers Sovereign would be a "net gainer" of people, he believed.

Dave McMillan is director of development for The National Partnership, a network of 250 independent advisers. Close to 100 per cent of its members would need to gain all or part of the qualification, he said.

Even those who had the high-level qualifications of certified financial planner or chartered life underwriter would need to upskill on the new code and legislation.

The National Partnership set up the TNP Institute at the start of the year using course materials from training provider AdviserLink, and was aiming to have all its people through by the end of August.

However, the December deadline was a challenge, he said. "There's a certain element of disbelief in the marketplace that December is a realistic target."

Tower Investments chief executive Sam Stubbs said his organisation would finalise its plans this week for getting advisers qualified. "We fully intend to participate in making sure our people are educated, and that will involve funding."

Around half of its 73 advisers were either fully or substantially qualified already.

AXA chief executive Ralph Stewart said the AXA Academy was launched in 2008 and had already trained over 180 advisers. Two-thirds had reached level five and the balance would reach it by the end of the year.

"This has been an early strategy for us, we've spent a lot of money on it."

The industry had had plenty of warning, he said.

Committed to the challenge

Havelock North SovNet adviser Bede Houlahan came to the financial services industry late in life.

At 73, he has been in the business nine years and says the decision to upskill is a hard call.

But the alternative is to give up work "which doesn't appeal to me at all. I don't really believe in retirement."

He has mainly dealt in insurance and thinks he will stick to that specialty.

He believes he knows a lot of what will be required by the new National Certificate in Financial Services already but doesn't underestimate the difficulty of going back to studying.

"But I can see beyond the immediate in that it represents an opportunity.

"One's got to accept the challenge."

Sovereign's offer of paying for the course fees will be a big influence in his decision. "That's going to to be a huge help.

"It shows their commitment."