Financial advice

AFAs can provide the same services as an RFA, but can also provide services for category 1 products, and can provide an investment planning service. Find out more about AFAs

RFAs are individuals and they can give financial advice for a category 2 product. They can also provide class advice to retail clients and financial adviser services to wholesale clients. Find out more about registering and your obligations

A QFE Adviser is an employee or a nominated representative of a qualifying financial entity. Find out more about QFE advisers and what they can sell.

Other (non-QFE) businesses providing financial adviser services have to be registered as a financial service provider. They may only provide personalised services to retail clients through an individual who is appropriately authorised or registered. Find out more about registering

A broker is an individual or a company that receives, holds, pays or transfers client money or property acting as an intermediary for a client. All brokers need to be registered and must also comply with the brokers' conduct and disclosure obligations in the FA Act. These provisions apply to anyone providing broking services, whether they are a financial adviser or not. 

• Who is not covered by the Financial Advisers Act
• The Financial Advisers Act and investment property consultants
• Overseas advisers

Making a recommendation, or giving an opinion about acquiring, holding or disposing of a financial product. Providing factual information only about a financial product, in the absence of any recommendation or opinion would not be considered financial advice.

For more information see s10 of the Financial Advisers Act 2008. The Guidance Note: Sale and Distribution of KiwiSaver focuses on factors FMA will take into account when considering whether advice is given on KiwiSaver, and, if so, whether the advice is class or personalised.

Designing or offering to design a plan that:

• is based on an analysis of an individual's current and future overall financial situation and
• identifies their investment goals and
• includes recommendations or opinions on how to realise those goals.

The focus is on the investment nature of the service, rather than the product recommendations arrived at.

For more information see s11 of the Act.

Deciding which financial products to buy and/or sell on behalf of a client, e.g. you are authorised to manage a client's investment portfolio.

The type of clients an adviser works with affects the type of adviser they are, and what they need to do to comply. The types of client are retail and wholesale.

Retail clients are any clients who are not considered 'wholesale' clients. Wholesale clients are defined in s5C of the Financial Advisers Act 2008.

The type of adviser you are, and what you need to do to comply, will partly depend on whether you offer a personalised service or a class service.

Personalised service - financial advice or an investment planning service

A personalised service is one that is given to a client who is readily identifiable by the adviser and, either the adviser has taken the person's individual situation into account, or the client would expect their individual situation to be taken into account. For more information see s15 of the Financial Advisers Act 2008.

Personalised service – discretionary investment management service (DIMS)

In the case of a DIMS, the service is a personalised service or a personalised DIMS if:

a) the service is provided to a named client of a client who is otherwise readily identifiable by the financial adviser exercising the investment authority under that service; and

b) the investment strategy implemented in, or to be applied under, the investment authority has been designed to take account of the client’s particular financial situation and goals or any 1 or more of them (rather than merely being customized from an investment strategy that applies to a class of clients, for example, by selecting options or making minor changes to the class strategy or authority).

Class service 

This is anything that is not a personalised service, e.g. brochures, seminars and internet material targeted towards a wide class of people rather than an individual. For more information see s15 of the Act.

AFAs, QFE Advisers and registered individuals or entities can all provide class service to retail clients, irrespective of which category of product the advice is about.

Note that advice provided about a class of products is not financial advice and is outside the regulatory scope of the Act. (See section 10.) This is a different concept than class service which is covered by the Act.

Category 1 and 2 products are described in s5 of the Financial Advisers Act 2008. Some category 1 and category 2 products are defined further in regulations. Additional products may be added to each category in the future, by regulations. 

Only AFAs and QFE advisers can give personalised advice to retail clients on category 1 products. QFE advisers are limited to advice on category 1 products promoted or issued by their QFE.

Personalised advice on category 2 products can be given by RFAs and QFE Advisers. However, if advice on category 2 products is given as part of providing an investment planning service, then the adviser must be authorised as well as registered.

To be an ‘eligible investor’ under the FMC Act a person must, before making an investment, certify in writing that they are an eligible investor.

The certificate may be for a particular offer of financial products or for a class of offers.

Further information on ‘eligible investors’ and eligible investor certificates can be found in the FAQ section.

To be an ‘eligible investor’ under the Financial Advisers Act a person must, before being provided with a financial adviser or broking service, certify in writing that they are an eligible investor.

Section 5D of the Financial Advisers Act provides detailed information on who are 'eligible investors' under that Act.

NOTE: Where the service being provided only relates to FMC Act financial products, a financial adviser or broker may also rely on a compliant eligible investor certificate provided under that Act.

RFA disclosure statements and the AFA primary disclosure documents must follow the prescribed format outlined in the regulations. This makes it easier for consumers to compare the services being offered by different advisers.

The explanatory notes that make up part of the regulations provide a starting point for understanding the requirements. You may not add any information to the prescribed form other than unobtrusive information such as a corporate logo. In addition you should note the following:

• Use your legal name which should be the same name listed on the Financial Service Provider's Register. This ensures a client can easily check details on the register.
• You must provide the document to your client in person or send it by email. You cannot just post it on your website or provide a link to the website. Links may break and if you update your disclosure statement your client won't have access to the version that applied at the time you provided advice.
• Your statement can include an electronic signature so long as such a signature meets the requirements of the Electronic Transactions Act 2002. These include requirements such as the signature adequately identifying the adviser and the person receiving the disclosure document consenting to being given a document with a scanned signature. Please see the Electronic Transactions Actfor detail on the requirements.
• You cannot provide a joint disclosure statement with another adviser. Although the Act refers to joint disclosure, regulations to enable this are not in currently in place.

The intent of the secondary disclosure document is to describe the specific nature of the products and services you are recommending to your client. You should do this clearly and concisely and in a manner that brings the required information to the attention of your client. The information that needs to be disclosed is set out in the regulations. In line with Code Standard 7, you should also consider whether any additional information should be provided to help your client make an informed decision about investing. The secondary disclosure statement does not have to contain all the products and services an AFA is able to provide (along with the related information) if this would result in a lengthy and confusing document for clients. It must, however, contain the information that is relevant to the products and services to be provided to the particular client. The secondary disclosure may be made in one or more documents. This flexibility can help an adviser choose the best way to make the information available to the client.

You cannot provide a joint disclosure statement with another adviser. Although the Act refers to joint disclosure, regulations to enable this are not currently in place.

If you're an AFA, advertisements about your financial adviser services must state a disclosure statement is available, on request and free of charge (see section 30 of the Financial Advisers Act).

You cannot provide a telephone disclosure for Category 1 products. For Category 2 products, you do not have to give a disclosure statement when personalised advice is given via telephone or video conference if certain information is provided orally before the advice is given. This information is:

1. That you are an AFA/RFA/QFE adviser
2. The name of your dispute resolution scheme
3. That you can provide full disclosure if the client requests it
4. Anything else FMA has specified in terms and conditions for AFAs and QFEs

You can give this information directly, by way of a pre-recorded message, or by other electronic means.

If you are acting on behalf of another person, for example your employer, you still have disclosure obligations. See our guidance question and answers for more information on this area.

As the regulator, we cannot provide definitive advice on how legislation applies to individual circumstances so we cannot review individual disclosure statements. We expect professional advisers to be able to form their own views and take advice where necessary, but we will assist by publishing explanatory material such as this web page. From time to time, we may ask to see individual advisers' disclosure statements as part of our monitoring, or if there has been a complaint about an adviser.

For more information about disclosure statements

• read the explanatory notes to the disclosure regulations
• talk to your professional body
• seek legal advice.