The Financial Adviser Act 2008 introduced an authorisation process to control who can and can’t provide financial advice. This has also caused some confusion, particularly for investors who are seeking financial advice.
There are 3 categories
- AFA – Authorised Financial Adviser
- RFA – Registered Financial Adviser
- QFEA – Qualifying Financial Entity Adviser
Authorised Financial Advisers (AFA)
AFAs are registered on the Financial Services Provider Register and belong to a Disputes Resolution Scheme. They also go through a more rigorous approval process by the Financial Markets Authority and have higher competency standards. Authorised Financial Advisers can provide personalised advice on complex investments, such as shares, bonds, futures contracts etc as well as what RFA and QFEAs can advise on (discussed below). Typical clients are individual investors, trusts and companies.
Registered Financial Advisers
RFAs are required to be registered on the Financial Services Provider Register and belong to a Disputes Resolution Scheme, they are not ‘authorised’ by the Financial Markets Authority. They can provide advice on more basic investment offerings, such as bank term deposits, consumer credit contracts or basic cash “PIE” funds (to name a few). Insurance advisers typically fit into this space and have little need to be an Authorised Financial Adviser unless they want to provider personalised investment advice.
Qualifying Financial Entity
Typically a larger business, like a bank who has staff facilitate the sale of their own products and can provide basic advice on insurance, bank deposits, mortgages etc. These staff members do not need to be registered on the Financial Services Provider Register, however the bank or business does need to be registered to a disputes resolution provider, such as the banking ombudsman.