Under the new financial advice regime, advice can only be provided by or on behalf of a financial advice provider.
We will license financial advice providers. There will be two phases for the licensing process – transitional and full. This will make the changes smoother and more manageable, particularly in relation to competency requirements. Find more details about licensing here.
A financial advice provider can provide advice:
through a financial adviser – a person engaged by the financial advice provider and registered on the Financial Service Providers Register
through a nominated representative – a person engaged by the financial advice provider but not registered on the Financial Service Providers Register
The Act introduces a package of changes to the regulation of financial advice. It sets out the duties that will apply to providers and individuals e.g. persons giving advice must prioritise clients’ interests.
The Act passed into law in April 2019. The new regime for financial advice is expected to come into effect by mid-2020.
New Code of Conduct
Anyone providing advice to retail clients is subject to a new Code of Professional Conduct for financial advice services. This outlines the standards of conduct, client care, competence, knowledge, and skill you need to meet when providing financial advice in New Zealand. The Minister of Commerce and Consumer Affairs approved the Code of Conduct in May 2019.
New disclosure requirements
You must disclose certain information to your clients to ensure they are making informed decisions.
The Ministry of Business, Innovation and Employment will consult on draft regulations in Q2 2019.
New registration requirements
To address misuse of the Financial Service Providers Register (FSPR), you will only be able to register as a financial service provider if you are providing services to New Zealand clients. This is a new requirement, which aims to improve client confidence and protect New Zealand’s good business reputation both at home and abroad.
The Companies Office is making changes to the Financial Service Providers Register (FSPR) to implement the changes to the registration requirements in the new regime.
Why changes are happening
The Financial Services Legislation Amendment Act introduces changes to ensure the conduct and client-care obligations of financial service providers and the regulation of financial markets remain fit for purpose. It also addresses misuse of the financial service providers register by offshore entities. The changes are designed to:
remove regulatory boundaries, such as the current adviser classifications (AFA, RFA, and QFE), the distinction between ‘class advice’ and ‘personalised advice’ and category 1 and 2 products
allow financial advice to be provided online as well as in person
set industry-wide standards for conduct and competence
Parliament is changing how we regulate financial advice in New Zealand. A number of government agencies are involved in this process. Below we outline which areas each of us is responsible for.