The Financial Markets Authority has published its third statistical report on Authorised Financial Advisers (AFAs) in New Zealand.
As at 30 June 2016, there were about 1,800 AFAs in New Zealand, steady on 2015 figures. But in a reversal of 2015’s figures, there are now more AFAs joining the industry than leaving; 120 people became AFAs, while 80 left the industry. In 2015, 90 AFAs joined the industry, but 110 left.
AFAs are now less likely to have large client bases of more than 300 clients than they were in 2014, the first year of the report.
Over the past three years, the number of advisers with total client assets of between $1 million and $5 million has decreased. However, the number of advisers with total client assets of over $100 million has risen since 2015.
Over half of AFAs provide advice to their clients about joining or transferring to just one KiwiSaver scheme. This has risen from 47% of AFAs in 2014 to 52% in 2016.
Most AFAs provide advice on insurance policies with around half providing financial advice on the replacement of insurance products to between one and 10 clients a year. The small proportion of AFAs offering insurance replacement advice to more than 25 clients has fallen since 2014.
Complaints
The report shows that the number of complaints the respondents receive is falling. In 2014, 10% members reported they received at least one complaint; the following year this fell to 9%, and in the year ending June 2016 this was 6.7%. About 1600 AFAs responded to the questions in each of the three years.
The report reveals that Wellington has the highest number of AFAs per 10,000 people, followed by Otago, Auckland and Canterbury. The West Coast has the fewest, followed by the Gisborne region.
For AFAs who do not work for a Qualifying Financial Entity (QFE), over half receive commission for their services and one in five get more than half of their commission and bonuses from one product provider.
Only one-fifth of AFAs who work for a QFE are paid commission, with 14% of them generating over half of their commission and bonuses through the sale of products from one provider.
The FMA requires AFAs to submit an annual information return each year.
The majority of AFAs can give personalised financial advice on all categories of financial products. AFAs are different from: Registered Financial Advisers (RFAs), who are not licensed or regulated by the FMA to the same extend as AFAs. RFAs can give class advice on all financial products, as well as personalised advice on non-investment financial products (such as mortgages); and Qualifying Financial Entity (QFEs) advisers, who do not need to register individually. They can give personalised advice only about products issued by the financial services firm that employs them; and the firm takes responsibility for the advice given. As well as QFE advisers, around one third of AFAs work for QFEs.