“It is a milestone day in terms of financial advice,” the Minister of Commerce and Consumer Affairs, Jacqui Dean, told delegates at the National Adviser Conference in Auckland.
The Financial Services Legislation Amendment Bill is a package of changes to the regulation of financial advice following the review of the Financial Advisers Act.
“The changes introduce an even playing field of conduct and competence duties across the industry, and remove the legislative barriers around advice.”
She says the review of the Financial Advisers Act has been a comprehensive process and it help clarify where there had been “unintended consequences in practice.”
The bill will improve access to advice by enabling sensible advice conversations, she says.
“Advisers will be able to have conversations with their clients which are determined by the client’s wants and needs, rather than by arbitrary barriers imposed by regulation.”
“Removing the confusing advice classifications will mean advisers can focus on giving suitable advice, rather than wasting time figuring out what they can and can’t do.”
The titles of those giving advice (AFA, RFA and QFE) was a hot topic throughout the review.
The bill introduces the term “nominated representative” as instead of the earlier proposal to us “financial advice representative”.
“I think the term nominated representative gives a clear signal to consumers that the advice they are being given is tied to the firm.”
The bill also introduces a more level playing field for advisers when it comes to determining the right level of knowledge, skills and competence.
“The new regime focuses on the conduct and competence of all who provide financial advice,” she said.
“This includes an industry-wide obligation to put the consumer’s interests first.”
“I think that the current situation where some advisers are required to put the consumer first while others are not is far from ideal.
“Consumers shouldn’t have to guess when an adviser may or may not be putting their interests first.”
Dean also gave an assurance costs of implementing the changes will be kept down.
“I want to assure you that any such costs will be justified and only imposed where there is a real benefit to consumers.”
The Bill introduces “firm licensing” which will allow for economies of scale. Firms of multiple advisers will be able to collate their compliance activities and achieve cost and time savings in the long run.
For example, a business with ten advisers will no longer have to complete ten identical ‘Adviser Business Statements’, as these processes are now completed at the firm level.
She says a ‘one size fits all’ approach to licensing is unlikely to work, so the cost of licensing will be proportional to the size of the business.