Code of conduct: what does the insurance space think?

Code of conduct: what does the insurance space think? | Insurance Business New Zealand

Code of conduct: what does the insurance space think?

The long-awaited first draft of the new code of conduct for financial advisers was released this month, and has outlined a number of new requirements that will become mandatory for all insurance brokers if it is passed into law. When passed, the code will mark the next stage of a wider cultural shift within the financial services sector, with the client being placed firmly at the centre of every transaction.

Among the new requirements are a minimum Level 5 qualification relevant to insurance, with the potential for older ANZIIF qualifications to be taken into account. The draft also outlines a series of 12 principles that all financial advisers must follow, and these range from protecting client information and managing conflicts of interest to having measurable competence, knowledge and skill within the area that a broker operates.

The draft code has since been widely welcomed by the broker sector which has cited it as a much needed line in the sand, especially when it comes to qualification requirements.

“We’re pleased to see the release of the draft as it’s been in the works for quite some time now,” Financial Advice New Zealand (FINANZ) CEO Katrina Shanks told Insurance Business.

“It’s good to see that it was written in plain English, so it’s easy for everyone to understand and follow. They’ve clearly listened to a lot of the feedback that was provided during the first round of consultation, and the result of that feedback is visible within the draft.”

“The level five requirement comes as no surprise, as that is generally a normal requirement for any financial adviser,” she continued. “The interesting part is the section on nominated representatives, as it’s yet unclear how they are going to show that they’ve got the competency of level five skill within their role. That’s an area which is going to have a lot more focus and consultation, and there will be conversations around how the code is actually going to work in reality.”

FINANZ is still working through the qualification side as part of its consultation with its members, and Shanks says it will also be looking at professional development, as there is no minimum requirement for that within the current code.

When it comes to the 12 outlined principles, Shanks says they are largely what the industry has been practicing to date.

“The other principles aren’t dissimilar to what we already had in place,” she stated. “We’re now going out to our members and consulting them using our Member Advisory Committees (MACs), and we’re trying to do that as much as we can before we put in our submission so that we can really get the voice of financial advisers back into the consultation process.”

When it comes to client care and ethical standards, industry commentators say the draft has largely established a solid boundary that also won’t mean sudden mountains of paperwork. This has been a commonly cited problem in places like Australia, where brokers are required to submit up to 30 pages to each client to complete their compliance obligations.

With regards to qualifications, some advisers have expressed concern that there is no method for recognising industry experience and prior learning, with many older advisers potentially having to sit formal qualifications in this field for the first time. However, according to NZbrokers partner services manager Simon Moss, the requirement is the only way of setting a solid and measurable knowledge standard across the industry.

“In principle, the draft code was as good as we could have hoped for,” said Moss.

“It has established a nice set of principles which are not too onerous for the adviser, which can often be the problem with these sorts of changes. In terms of the Level 5 qualification requirement – insurance is an international business, and we all have to meet a standard. The only measurable way to do that is to have some form of qualification.

“There is also a potential ability there for older relevant qualifications to still be used, and that covers people with the old ANZIIF credentials,” he explained.  “If they can demonstrate that they’ve achieved those certificates, have maintained that knowledge with good CPD points over the last few years and that they have a current working knowledge of the regulatory regime, then they can use that in their compliance. But for those who currently have nothing – it’s bad luck for them, and it’ll really depend on their motivation to go and sit a Level 5. It would really be far too lenient to allow advisers to continue until 2022 with no measurable qualification.”

When it comes to the 12 proposed principles, Moss says they will allow cluster groups like NZbrokers to have stronger conversations with its members and to monitor compliance much more closely. All standards of practice in the industry have so far been voluntary, so the code will give groups a strong mandate within which to work.

“A lot of brokers will believe that they have been adhering to all those principles over the last five years, but I don’t believe they’ve truly reflected on those each time they’ve offered a piece of client service,” Moss said.

“That’s a cultural change, and I think it’ll take some shifts for that to happen. But now it’s no longer part of a voluntary standard that we had previously, it is written in law and has to be done. That gives the ability for networks like us to talk to our members quite differently, and I like the integrity that this gives our industry. These things will be documented properly, and there will be processes in place to ensure that they are happening.

“Overall I believe it’s very fair, and it certainly addresses the need for more professionalism in our industry.”