Host: Kia ora everyone, welcome to 5 Minutes with the FMA, a podcast by New Zealand’s Financial Markets Authority Te Mana Tātai Hokohoko.
Today we’re talking about New Zealand’s new-look financial advice regime, which has just passed a major milestone, with all financial advice providers now required to hold or operate under a full license.
To find out more we’re joined by Director of Deposit Taking, Insurance and Advice at the FMA, Michael Hewes.
Host: So, Michael, what are the main changes to the way financial advice is delivered?
Michael Hewes: We’ve now moved to a full licensing regime for giving financial advice. That means if you’re providing what’s known as ‘regulated financial advice’ to consumers then from March 17, you would have needed to be operating under a full licence. So if you’re a sole operator you need one under your own name, but if you work for small firm or a large provider, then they’ll need to have one.
It’s about ensuring all advisers meet the same standards, so Kiwis have access to quality financial advice.
Host: So how has the change gone?
Michael Hewes: We’ve been really impressed at how many advisers have recognised the opportunity and done the mahi to meet the new requirements. It’s gone really well and collectively, these efforts have really strengthened the sector as a whole.
Host: What sort of advisers are covered by these changes?
Michael Hewes: There’s a wide range of financial advice providers out there, they include investment advisers, who help Kiwis manage their investments such as KiwiSaver, there’s mortgage and insurance advisers (also known as “brokers”) and these are the ones who help with home loans and insurance policies.
These new licences cover sole operators and small businesses, right up to the big institutions.
Previously different types of advisers came under different rules and standards, so now it’s more consistent – this makes it easier to get good advice.
Host: So what are the main differences about financial advice now compared to a few years ago? More education or greater oversight?
Michael Hewes: These new requirements include adherence to the Code of Professional Conduct for Financial Advice Services and its standards of ethical behaviour and competence, knowledge and skill.
Advisers must be part of an approved disputes resolution scheme, one that clients can use for free in the event of any problems.
There are also requirements around business continuity planning, record keeping and cyber-security that also need to be met before we issue a licence.
Host: Does a licence guarantee quality or any greater protection for my investments?
Michael Hewes: A properly licensed financial advice provider has gone through a process with the FMA that ensures there are some basic things you can count on – we’ve already mentioned minimum qualifications, a dispute resolution service, and a code of conduct.
You can be sure they’ve reached a certain minimum level in order to get the licence issued by us. You can also know that the FMA will be monitoring all of these licence holders to make sure standards remain high.
But it doesn’t mean all advisers are the same – some will work for big companies, some by themselves and they’ll often specialise in different areas.
Your adviser must put your interests first, they must let you know if they’re being paid commissions.
And of course you can expect the information provided to you is fair, professional, and suitable. Also that you understand it and your information is protected.
Your adviser must let you know the products they can advise you on and what they can or can’t do in their role.
Host: And why is getting financial advice a good idea?
Michael Hewes: Many New Zealanders are navigating challenging times financially, so the value of quality advice is particularly important right now.
The new regime is designed to give people greater confidence to go and get professional advice while making important financial decisions – like planning for retirement or getting the best mortgage structure or insurance policies – and greater confidence in the quality of the advice they receive.
Thanks Michael, that’s Michael Hewes and that’s another Five Minutes with the FMA. There’s more about the new financial advice regime on our website at fma.govt.nz.
We’ll bring you more FMA Insights next month, until then hei kānō mai – bye for now.
