Sociedades mercantiles

One submitter noted that this would not prevent a determined client from turning to another adviser and asking for that service to be performed on an “execution only” basis.

One submitter suggested that many problems in the industry have not been caused by investors rejecting sound advice, but by investors failing to take advice at all and just responding to an advertisement.

Nine submitters questioned whether, if one AFA determined that it was inappropriate to provide a given service, the client would then have to disclose this to another adviser. They stated that the client may not wish to even disclose the existence of the relationship with the other adviser.

One submitter stated that the most important aspect is to ensure that the client has been properly advised and then it is up to the client to make an informed decision regarding how to proceed. They submitted that an AFA should be able to provide the services in the situation contemplated by question 22. It was argued that if they could not, a situation could arise where a client goes to an AFA who carries out a suitability analysis (which should the service is not in the best interests of the client) and is then prohibited from providing the service notwithstanding that the client may still want it. The client would then need to go to a different AFA, consent to not having a suitability analysis in order to receive the service that the first AFA was not permitted to provide because he or she carried out the suitability analysis.

One submitter suggested that this was too hypothetical.

One submitter stated that the difficulty with requiring an AFA not to carry out an unsuitable transaction despite the client’s insistence is that it places the adviser in a difficult situation. They

submitted that it was possible that the adviser will taint their analysis, even unconsciously, if they know they will lose work as a result. It was submitted that it is better for the adviser to provide an objective analysis so that the client is properly informed.

One submitter expressed concern that the proposed standards could place an AFA in the role of decision-maker or gate keeper rather than adviser. In particular they stated that proposed standard 13 would prohibit an AFA from providing financial adviser services that he or she believes are unsuitable for the client’s needs. One submitter stated that this misstates the role of the AFA and negates the clients’ right to choose. It also was submitted that this ignores the reality that advice is opinion-based and different AFAs may make different recommendations.

That submitter also stated that this could encourage clients to shop around for an AFA prepared to give effect to their instructions and this would not be in the best interests of the consumer or consistent with the aim to promote sound and efficient delivery of financial advice. They submitted that the AFA should be able to provide financial adviser services if he or she informs the client that the services are not suitable but the client still wishes the AFA to provide the services.

One submitter agreed that if the suitability analysis is undertaken and the solution is unsuitable, then the services should not be provided by the AFA. However it was noted that if full disclosure has occurred and documentation and records are kept, undertaking investment transactions for a client may be appropriate. They stated that the client has a right to proceed once there has been adequate disclosure and once appropriate waivers/disclaimers are signed. It was submitted that an over- arching standard like this is inappropriate as this issue should be dealt with on a case by case basis. They stated that if it is decided that AFAs can provide the services provided full disclosure and waivers have been exchanged, the Code should provide guidance regarding when it is appropriate to provide the services.

One submitter did not agree that either of the proposals should apply to financial advice or investment transactions because neither of those types of financial adviser service should require suitability analyses. They stated that the duty to exercise reasonable care, diligence and skill will protect the quality of those services. They stated that if clients are intent on purchasing particular financial products, but AFAs withhold advice and/or refuse to perform execution-only investment transactions, this will significantly curtail consumer freedom.

One submitter recommended that standard 13 be reworded to be more like IFA’s rule 25 and the AFA should not be permitted to allow a client to opt out.

Other matters

One submitter suggested that standards 12 and 13 were inappropriate and impractical for the share broking industry, especially when a client just wishes an AFA to complete a transaction. They stated that if the client wishes a transaction to be carried out contrary to a suitability analysis, the Code should not prevent them.

One submitter suggested that standards 12 and 13 were too prescriptive for many situations when an investor just requires an NZX AFA to facilitate a transaction. The submitter recommended removing standards 12 and 13.

QUESTION TWENTY-THREE: Do you agree that the proposed standards concerning