GRTV

Even the highly capable need financial advice

Financial Advice NZ CEO Katrina Shanks says getting her own financial adviser has transformed her life.

Back in the studio we have Katrina Shanks, the chief executive of Financial Advice New Zealand. Welcome back, Katrina.

Thank you for having me.

Last time you were here, you were quite new in the job, but now you've seen a lot of the financial advice sector. And I read somewhere that you've actually got your own financial adviser now. How's that process been?

I do have my own financial adviser who's totally transformed my life.

Yeah?

Yep, it's been a great experience. And once again, I hadn't had financial advice before I took this role and I thought it was really important that I understood what that looked like.

So, why hadn't you done it beforehand?

I don't know. I think like most people, I think I'm pretty competent. I'm a chartered accountant by trade. I understand business and I understand my own finances and I know how to read a contract. So, I thought I didn't need it, but actually now that I've had advice, I realise just how invaluable it is and how it gives you a different [way] of looking at things. It’s totally transformed my life.

Is that a story you're going to [share more publicly]?

A couple of weeks ago, it did go a little bit more public when we wrote about that journey. I wrote about it in an opinion piece in Stuff and had a lot of feedback from that I've got to say, but absolutely everywhere I go I talk about this journey of seeking financial advice and how it can change your life because I truly believe it does. And that's what we're here for at Financial Advice New Zealand and that's what financial advisers do every single day. They help people to increase their financial health, wealth and wellbeing.

The other day you were saying to me, and good on you for [your honesty with this], that you've been surprised at how resilient the financial advice sector is because it's gone through so much change. Can you tell me a bit about what you've seen there?

Well, huge change, not just through the legislation. Obviously, we had FSLAA come through, which has set the environment which FAPs are going to operate in in the future. That's getting your mind around what does the licence look like? What do my liabilities look like? Not only my company, but also myself, because you've got duties under both. That's been quite a journey.

And then on the top of that, you've got the disclosure requirements, you've got full licensing coming in, and then also we've had environmental change with how the different dealer groups and aggregators have looked to add value to the process as well, which they do. And then on top of that, we've had CoFI come in for conduct and culture for product providers and companies – and their reaction to what that looks like as well has changed the environment slightly. Just as you think that the environment has settled, there's another change that's come in.

Do you think financial advisers have faced far more change than other professions?

I think so. I was reflecting on this a few weeks ago and I can't think of any other sector which has gone through change so quickly over such a short period of time. And it's been significant change, but not just change from legislation, change from their commercial agreements and the environment they work in and the market as well. The only thing that's really constant is the good advice that they give every single day.

Interesting isn’t it?

Totally.

And turning to some work being done by your organisation, Financial Advice New Zealand, the Trusted Adviser. That was something which got talked about right at the formation of the association. Why has it taken so long to get there and how difficult has it been to put together?

When the three organisations came together they wanted to develop a quality mark and that's actually in our constitution that it was to be developed. And so, that was one of the briefs I had when I first came in. That's been two years in the making because the environment has been changing so much – and it's really understanding where the legislation and the regulation was going to sit. What does that base level of compliance look like? Then understanding the different values which were coming out through the dealer groups and aggregators and the conduct and culture coming through as well, where that was all going to land? That's taken a while to land in a certain place. So, now that we understand what the environment is looking like, it was much easier to create a quality mark which means something. It means something not just to advisers, but also to consumers.

One of the questions which I wonder about, so if you're going to advise one of your members out there and they're using this quality mark and something goes wrong, how are you going to manage that?

We'll have a process in place, which will say there are certain things that we expect of you as a member, there are certain things that you have to have in place to have the Trusted Adviser mark. There are five criteria that we've gotten there and that's: experience, qualification, ethics, PI and there's one more, which is ...

Twenty hours of CPD.

Yeah. There are those components, which are the criteria to get it. But once again, it is all about conduct and culture and it's all about being professional. And our membership have already got rules around that.

Will there be some sort of disciplinary process in there if something goes wrong?

We do have that anyway and as a member you have to act with integrity and we have all the criteria in our membership as it is. This is just a mark that stands a little bit beyond the membership to say: “I am committed to my profession and I'm going to do these things to show that commitment for this mark.”

What percentage of your members do you think will go for a Trusted Adviser status?

Well, we think quite a few. There'll be some that will already be eligible for it. CFP, CLUs, for example who ...

Will they get it automatically?

We're considering that. That's part of the consultation process. Obviously, there'll be some that already meet that mark. AFAs mainly will meet that mark as well, maybe apart from the ethics component. There'll be some which will already meet that mark. And so, this consultation period is about teasing that out. And should we allow people in straightaway or should we let the process just go slowly and you apply for it?

And the consultation, has it been all quite similar or are you getting lots of variations in there?

Yeah, we've had fantastic feedback actually. And it was a really genuine consultation as well. We really wanted to hear what the membership think about this and also the other stakeholders out there, what they think about the mark and where it's landed. And it's been overwhelmingly supportive of it. There has been feedback around should somebody be grandparented in, should we be looking at longer – five instead of three years of experience? Should it be qualification based? Should it be a higher qualification? We've had lots of different feedback, but overall, really supportive of where we've landed with the Trusted Adviser.

So, you think most of them will go into this?

I think there'll be a majority of members that'll look to meet the criteria, but it's a journey. And for those which don't quite meet the criteria who, for example, haven't got three years of experience, who haven't quite got their qualification yet, we think it's really obtainable for financial advisers to get this mark.

Do you think it'll be different between the insurance, the mortgages and the investment space ... or similar?

Well, with the new legislation, we're all similar and we're all the same and we all give regulated financial advice. We're all on the same journey together and I think what the government has done with the legislation is they're saying, we expect anybody that gives financial advice to be a professional. And also in the licensing conditions, they're showing levels of professionalism for the businesses as well. What does a professional business look like? That's certainly where the government is going and I think it's certainly what the consumer expectation is that when they deal with a financial adviser, they get a professional service and absolutely most advisers already do that.

Yeah. And how are you going with membership numbers?

They're pretty static. We're in renewals at the moment and looking really positive. We're really pleased.

Yeah. Good. And lastly, we've just touched on CoFI, the conduct legislation. You're supportive of it, but you've got a few areas [where] you'd like to see some changes. What are they?

Yeah, absolutely. We're all for good conduct. Of course we are. As everybody else is in the sector. Really it's about understanding the powers which have been given through regulation for licensing on remuneration. We think those powers are too wide and too far reaching. I can't think of any other industry where your remuneration is set in licensing conditions. We think that reach has been most probably a little bit too far. We've got concerns [that] FAPs have been excluded from this legislation, but individual advisers haven't. But we think that's just a drafting error. We'd like to see that being fixed in the drafting. And explicitly excluding financial advisers from that legislation, I think is really important as well.

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