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Adviser Categorisation Alternatives

The RDR proposal to create three categories of advisers drew the most responses. A progress report was presented by Leanne Jackson at the 2015 Insurance Regulatory Seminar.

RDR so far
All stakeholder feedback received has now been reviewed, collated, summarised and debated. Follow-up workshops are being held with industry reference groups. For now, the focus is on adviser categorisation and Phase 1 of the implementation process.

Adviser categorisation
The original proposal, that three tiers of advisers be introduced, received a substantial amount of comment from the industry. Most commentators felt that simply distinguishing between tied and independent advisers would eliminate a lot of confusion amongst clients. It was also mooted that the term “product supplier agent” be used to further distinguish between tied advisers and independent ones.

At this stage, indications are that the FSB will not proceed with the minimum product / product supplier range criterion for independent advisers, but rather use the extent to which product supplier influence can lead to conflict of interest.

Possible Two-Tier Alternative
Product supplier agent:

  • not licensed in own right, but provides advice on the licence of the product supplier, who remains fully accountable for advice
  • may provide advice only on products of own product supplier / group – including “external” investment products on own supplier’s LISP platform
  • the FSB is considering allowing agents to be juristic entities for group structure purposes – but with branding restrictions
  • regulator also considering allowing for limited “gap fill” by product supplier agents by allowing a product supplier agent to act as an agent for more than one product supplier – but limited to one supplier per line of business.

Registered Financial Adviser:
This model could replace the previous “multi-tied” and “IFA” categories. Such an adviser would operate under the following conditions:

  • licensed in own right to provide advice (sole proprietor) or provides advice on licence of an authorised advice firm provided the advice firm is not also a product supplier
  • licence holder (sole prop or advice firm) is accountable for advice provided, although applicable RDR product supplier responsibility requirements will also apply
  • will need to comply with all the conflict of interest controls to mitigate risk of different levels of influence by different suppliers
  • A registered financial adviser / adviser firm may also describe itself or its advice as “independent”, provided that:
    • no binder or outsource arrangements with any product supplier exist
    • no product supplier holds any ownership or similar interest in the adviser / firm, and the adviser/ firm holds no such interest in any product supplier
    • no other forms of product supplier influence exist
  • Being “independent” would not be a separate licence category, but rather an additional label / descriptor that a registered financial adviser may use if it meets the above standards.

Financial Planner
Registered financial advisers or registered product supplier agents may also describe themselves as a “financial planners”, provided they meet the applicable standards for financial planning.

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