A new adviser regime is raising the bar on financial advice in New Zealand, setting out to improve its quality and availability.
From Monday, a new financial advice regime under the Financial Services Legislation Amendment Act 2019 comes into force. New rules require financial advisers to meet certain competency standards and abide by a new code of professional conduct, over a two-year transition period.
Under the code's requirements, people seeking financial advice can expect advisers to treat them fairly, to act with integrity and to give advice that's suitable and understood.
In an online statement on Monday, Commerce and Consumer Affairs Minister David Clark said as COVID-19 has affected numerous Kiwis financially, it's more important than ever that advisers act in their clients' best interests.
"Financial advice plays an important role in helping New Zealanders achieve significant milestones in their life, such as saving for a first home or planning for retirement," Clark said.
"The new regime will give consumers greater confidence to seek advice that will help with their financial goals, providing them with greater trust in the quality of that advice."
Executive director of Strategi Group David Greenslade told Newshub the reason for developing the regime was to improve advice quality and availability. Overall advice standards will be lifted and people should find getting access to advice easier.
"It now creates more of a level playing field so that at the end of the two-year transition period, the New Zealand public can trust that someone engaged to provide regulated financial advice has the competence, knowledge and skill to do so," Greenslade said.
From Monday March 15, all advisers must have a transitional license as a financial advice provider (as an individual or linked to business). The transitional license lasts two years, during which time they're required to meet licensing standards and apply for a license, whilst continuing to provide financial advice. They're also required to demonstrate the same outcomes as the Level 5 New Zealand Certificate in Financial Services v2 (or a recognised equivalent).
"The public should be asking an adviser they are intending to use, if he/she has that qualification or one of the formal equivalent approved qualifications," Greenslade added.
A Financial Markets Authority spokesperson said in addition to general competency and skills, advisers are required to have knowledge and skills based on the type of advice they provide.
"[For example], in the case of KiwiSaver, an adviser would need the 'general' standard, together with the standard of 'designing an investment plan' [and] there are different strands for mortgage and insurance products," the FMA spokesperson said.
"The code also requires advisers to keep their competence, knowledge and skills up-to-date."
Among the benefits of using an adviser are getting tailored financial advice to help financial decision-making, and recommendations on products best suited to individual needs.
Financial Markets Authority director of market engagement John Botica said the start of the licensing regime is the result of almost five years' work aimed at increasing Kiwis' trust and confidence in the financial sector.
"More than 10,200 financial advisers have come into the new licensing system, with more than 1700 transitional licences approved and nearly 1000 authorised bodies," Botica said.
To help people choose the right adviser, the FMA has the following guidelines:
- Did the adviser explain their experience and qualifications and what type of licence they have?
- Did they indicate the type of products they can advise on? Some advisers specialise in certain areas and are required to tell clients about their scope of service.
- Did they confirm how they're paid? For example, client fees or commissions paid by companies whose products they sell.
- If making an investment, did the adviser explain where and how money will be held?
- Did they outline the complaints process if there's a problem?
Consumers are able to check whether a financial adviser is registered and who they work for by searching the Financial Services Provider Register.