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FSC522 The Regulatory
Framework
Case Study- Tohutohu Mokete Limited
(TML)
This case study requires you to apply legislation to a
financial advice situation.
Background information
Tohutohu Mokete Limited (TML) is a financial advisory business
and a financial advice provider (FAP). It engages financial advisers
to give financial advice on its behalf. It has a very informative
website which gives information about its people, the services it
provides and its regulatory obligations.
The company has a strong client-centric focus. It has no ties to
product providers, and their advisers work for client fees rather
than commissions. This fosters the principle of working
respectfully in the client’s interests and reducing conflicts of
interest.
TML has a comprehensive set of policies, procedures and
guidelines, which are designed to ensure the business complies
with all relevant legislation and code of practice principles. All staff
must adhere to these policies, procedures and guidelines.
Kauri Parata is a financial adviser at TML. He is an investment
specialist and can give advice on a wide range of direct and
managed investments. He has completed his New Zealand
Certificate in Financial Services (Level 5) with the investment
strand.
He is unrestricted in the range of providers he can use and does
not receive commissions from any product providers. He is a
salaried employee and, in keeping with TML’s fee policy, charges
clients:
• a flat fee of $400 for one-off investment advice on one
product, charged at the end of the consultation
• an hourly rate for more complex advice on a range of
products.
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Kauri always discloses to clients that he does not receive
payments from other people or organisations that might
influence the advice he gives. In sum, he is free of any conflict of
interest, commissions or incentives that would materially
influence the advice he gives.
No reliability event has happened to Kauri or TML.
Read the following transcript of a meeting Kauri has with a client,
Tui. As you read through the conversation, identify where specific
Acts apply, and determine whether Kauri and TML demonstrate
compliance or non-compliance with that Act. This will prepare you
for the questions in Task 4.
Transcript – First meeting
Kauri: Good morning Tui, hope you found a park OK.
Tui: Yeah, I was lucky, right outside.
| Kauri: | Oh, that’s great. Now, you said on the phone that you wanted help signing-up to KiwiSaver – is that right? |
Tui: Yeah, that’s right.
Kauri: And you only want me to provide advice on KiwiSaver?
Tui: Yeah, that’s right. I looked on the Sorted website but
there are so many funds and I don’t know where to
start. I really need help in choosing the right fund. And
as I mentioned on the phone, I’d also like some advice
on how much I need to contribute.
Kauri: I can help with all that Tui.
Here’s my disclosure statement. This contains
important information that will help you decide if I’m
the right person to give you financial advice.
[Kauri gives Tui the Disclosure Statement and explains
key information.]
Tui: OK, thanks, that seems fine.
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Kauri: Good. Now, I need to get some personal details and
documentation from you, as I explained on the phone.
Tui: Here you go. Glad you mentioned all that on the phone,
Kauri, otherwise I wouldn’t have had the right
documents – so much stuff!
Kauri: Yes, I know.
[Kauri collects the personal information required to
sign Tui up to KiwiSaver, including passport
identification and proof of address, and inputs details
into her office computer which is fully passwordprotected.]
Kauri: Now let’s sort you out with KiwiSaver. Sorted was a
good place to start; so do you know how KiwiSaver
works?
Tui: I know it provides benefits like employers matching
contributions up to 3% and then there’s the government
contribution as well; plus it’s great to know you have an
investment that’s government guaranteed.
Kauri: Let me stop you there Tui, I don’t want you to have the
wrong idea about KiwiSaver. It’s really important you
understand that KiwiSaver investments are not
guaranteed by the government. You make your
investment choices at your own risk.
[Kauri provides an overview of how KiwiSaver works.]
Are you still happy to go ahead and invest in KiwiSaver?
Tui: Yes, and thanks for clarifying my misunderstanding
Kauri. I can see now it’s even more important I choose
the right fund. And as I said earlier, I really need advice
on how much to contribute.
Kauri: Well you’re right, it’s important you go into the fund that
best suits you. And I can help you decide on the best
contribution rate too. I’ll just need to spend time
understanding your current financial circumstances and
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your retirement expectations; for example, when you
expect to retire, the lifestyle you want in retirement, and
how much you’ll need each week to live on.
Let’s work through all that…
[Kauri asks Tui a series of questions to help establish
Tui’s investor profile. He also obtains information about
her financial circumstances and establishes her
retirement goals and aspirations.]
Well that’s all for today Tui. As I said on the phone,
today’s all about me getting all the information I need
from you to come up with the best solution. Now I’ll
analyse all the information you’ve given me, and we can
meet up again this time next week when I’ll go through
everything with you.
Tui: That’s great Kauri, thank you. See you next week.
[Tui leaves. Meeting closed]
Transcript – Second meeting
Kauri: Welcome back Tui, hope you had a good week.
Tui: Yeah, all good thank you Kauri.
Kauri: Now you’ll recall last week I gave you my disclosure
statement. [Tui nods in agreement] I’m now required
to disclose further information to you. This will help
you decide whether to act on my advice.
[Kauri gives Tui the Disclosure Statement and explains
key information. He points out that information about
complaints and dispute resolution processes is
available on TML’s website.]
| Tui: | OK, thanks, that seems fine. Hopefully I won’t need to make a complaint! |
Kauri: So, now let me take you through my recommendations.
[Kauri gives Tui a copy of the Aotearoa Investments
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Product Disclosure Statement, talking through key
points, including the fees.
He provides Tui with a couple of projected retirement
balances using assumed inflation rates and investment
returns. This illustrates the impact the different
contributions rates could have on his balance at his
retirement age and beyond.]
Tui: Thanks for taking the time to explain that so clearly
Kauri. I’d like to go ahead with the Aotearoa
Investments Balanced Growth Fund please, and I’ll
start with a 4% contribution rate.
Kauri: Great; let’s get you signed up!
[Paperwork completed.]
Can I help you with anything else today?
Tui: No, I think that’s all, Kauri. Thanks for your help.
Kauri: That’s OK, nice to meet you, Tui. Please feel free to
call me if you have any questions.
[Tui leaves. Meeting closed.]