New Commerce Minister David Clark has ushered in the Financial Services Legislation Amendment Act (FSLAA) era with an upbeat assessment of rising demand for advice.
“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,” Clark said in a released issued on Sunday morning.
He said the COVID-crisis, for example, had left about two-thirds of New Zealanders “financially exposed or in difficulty”, suggesting a huge latent need for professional advice.
“This means it’s more important than ever that Kiwis are getting financial advice that puts their interests first,” Clark said.
“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. And we know that those who get financial advice achieve better financial outcomes.”
As of today (March 15), all broadly defined financial advisers will have to operate under a licence – with the clock now ticking on the two-year transitional licensing regime.
About 2,600 regulated advisory businesses have crossed the FSLAA finish line as at last week including more than 1,600 transitional licensees and almost 1,000 ‘authorised bodies’ (which operate under the aegis of a third-party licence).
According to the Financial Markets Authority (FMA), the FSLAA population would hold roughly 10,000 ‘financial advisers’ and a further 12,000 or so ‘nominated representatives’ – the latter a direct responsibility of licensees that employ them.
Both ‘financial advisers’ and ‘nominated representatives’, however, are subject to the new Code of Professional Conduct, which kicks into gear along with the FSLAA licensing rules.
“The changes will increase transparency by requiring financial advisers to disclose any conflicts of interest, commissions they are paid, and limits on the companies or products they advise on,” Clark said in the statement.
“The same basic protections for consumers will apply regardless of how they choose to access financial advice – whether that be in person or online.”
He said the impending Financial Markets (Conduct of Institutions) Amendment Bill – colloquially known as COFI – would also complement FSLAA.
“The changes to financial conduct will work alongside the improvements to financial advice to ensure consumers can have confidence in the financial services sector,” Clark said.
COFI, which will introduce another licensing regime for insurers and banks, was on track to pass into law within the next few weeks.