Changes recommended to the FAA and FSPR are good for consumers
Media release MR No.2016 – 19 13 July 2016
The Financial Markets Authority welcomes the Minister of Commerce and Consumer Affairs, Paul Goldsmith’s recommendations on changes to two significant pieces of legislation for NZ’s financial markets. The Financial Advisers Act (FAA) and Financial Services Providers Act (FSPA) have been through a review process including extensive consultation for the past 18 months.
The proposed changes to government policy for financial advice announced today are a positive step in improving access to quality financial advice for New Zealanders.
The FMA’s recent report into insurance replacement business illustrated the confusion for consumers, where for the same financial product there were two categories of advisers – Authorised Financial Advisers and Registered Financial Advisers – with different obligations, conduct expectations and standards.
FMA Chief Executive Rob Everett said that the FMA’s 2015 report into KiwiSaver sales and advice also found that very few people were getting advice about their retirement savings scheme, partly due to complexities within the regime.
“We found that providers were concerned about whether customers thought the advice they were getting was class or personalised. Eliminating this complexity should make it easier for more people to get the advice they need, which is to everyone’s benefit and good for confident participation in New Zealand’s financial markets,” said Mr Everett.
In order to create a level playing field and to simplify the financial advice regime, categories of advice (e.g. class/personalised), adviser (e.g. AFA, RFA, QFE adviser), and product (e.g. category 1/category 2) will be removed.
The proposed changes allow for the provision of financial advice by firms with a financial advice services licence in compliance with a Code of Conduct. A firm providing financial advice through its agents is responsible for that advice.
The term ‘financial adviser’ is to be restricted to those financial advisers that take personal responsibility for the advice that they provide. Financial advisers will be accountable directly to the FMA, while ‘financial agents’ will be accountable to the firm with the licence, and the firm will be accountable to the FMA.
All advice would now be held to the same basic standards and conduct obligations with an increasing focus on competency, conduct and disclosure. A financial advice services licence may also include the ability to operate a robo-advice platform.
Changes to the FSPR were also announced today to ensure that only a firm in the business of providing financial services to New Zealanders or from New Zealand – and not just back office administration from a location here – will be entitled to register on the FSPR. This will help address the misuse of the register by offshore companies with little or no connection to NZ, that are registering to take advantage of NZ’s good reputation and to give the impression they are regulated or licensed here.
The FMA supports the introduction of new legislation in line with the Minister’s recommendations.
“We will be considering the implications for the FMA in terms of implementing, supervising and enforcing a new framework both for financial advice and the FSPR. In particular, we will work closely with MBIE and advisers to assist with an effective transition to a new regime for financial advice,” said Mr Everett.
Full report here
Posted by Alec Waugh