Hypo Venture Capital Zurich Headlines:Shortage of independent financial advisers looming

http://hypoventurecapital-research.com/2011/05/hypo-venture-capital-zurich-headlinesshortage-of-independent-financial-advisers-looming/

Financial advisers who can give independent guidance to New Zealanders will be in short supply when the new financial services regime comes into full effect on July 1, less than two months away.
And at least one industry player is warning it will only worsen the country’s underinsurance problem.
So far the Financial Markets Authority has on its records 4953 registered financial advisers (RFA) and 454 authorised financial advisers (AFA). It expects the numbers to rise to 5000 and 2000 respectively by the regulation deadline, but that is still far less than the numbers the industry originally estimated.
AFAs and RFAs are considered “independents” compared to qualifying financial entity (QFE) advisers who are “locked” into giving advice on products they market. So far, the 63 QFEs on the register have an estimated 20,000 advisers among them.
Fidelity Life chief executive Milton Jennings said the decrease is not good for the insurance industry which is serviced by both RFAs and QFE advisers, and the retail investment industry which is covered by AFAs.
“We’ve got an underinsurance problem in this country. Less people selling insurance will only make the problem worse.”
He said the lack of independent financial advisers tilts the insurance market to favour banks that “are getting far better in insuring people”.
It will split the market with “RFAs on the high-end side of the advice market and banks in the transactional volume end of the market with the simpler type of products”.
Jennings said the Government was expecting 5000 AFAs but “there’s not even 2000 right now” because many advisers stop at the entry RFA level even if they could get to AFA status because of the cost.
“There’s a lot of compliance they have to go through, a lot of costs and unless they’ve got a strong business then they’d find it difficult to make good money,” Jennings said.
When you compare the 2000 AFAs expected by July and the 1.7 million KiwiSaver members, Jennings said it’s like “having one AFA for every 800 to 1000 people” – which is not in balance.
The FMA’s Mel Hewitson said “5000 was never a target, but an estimate made early in the FAA regime planning stages”.
“Not having available basic information like that is one of the problems we’re facing regulating a previously unregulated industry. In the past we’ve never known how many advisers were offering complex AFA-level advice for clients because there’s been no requirement to register or qualify before,” Hewitson said.
He said it had expected the qualification requirements of the new regime to reduce adviser numbers, “that was the experience in Australia as well”.