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  4. Consultation: Request for feedback – Guidance Note: Sale and Distribution of KiwiSaver

Consultation: Request for feedback – Guidance Note: Sale and Distribution of KiwiSaver

The final date for submissions is Monday 16 July 2012.

We are consulting on proposed guidance on different service levels for the sale and distribution of KiwiSaver schemes. The draft guidance note can be downloaded below.

We propose to issue a guidance note because:

  • KiwiSaver is important for New Zealand. Our functions include promoting the confident and informed participation of investors and consumers in the financial markets. This guidance note helps to promote high standards in the sale of KiwiSaver schemes and promote investor confidence to invest in KiwiSaver and in the capital markets more generally.
  • We are aware of concern in the industry about the extent of services that may be provided by different categories of advisers. (See examples of the questions and complaints we have received) We want businesses to have a clear understanding of their responsibilities. This guidance should assist firms and advisers with meeting their obligations.
  • We are aware that there are inconsistent practices in the market, with different standards being applied to similar service levels. FMA's objectives include the promotion of fair financial markets. We want to provide more guidance to improve consistency.

We recognise that an important objective of KiwiSaver is to make it easy for New Zealanders to save for their future. In developing our guidance, we have considered the need for potential investors to have access to information about KiwiSaver schemes, and to advice which is provided with skill, care and diligence.

Overview

The draft guidance note focuses on factors FMA will take into account in considering whether advice is given on KiwiSaver and, if so, whether the advice is a class or personalised service. It describes our interpretation of existing law, and how we will apply and enforce it.

In summary, it explains that the type of service provided will be judged within the context of the interaction with the client. Types of service are:

  • 'no advice'- (also sometimes referred to as 'information only'). For example opinions about a class of products or the procedure for buying a product. FMA considers that there are limited circumstances in which a person presenting a particular KiwiSaver scheme to a client will not be considered to have provided an advice service (either class or personalised).
  • class advice - advice that is generic to an audience, for example, advice in a brochure or seminar. The client's reasonable expectations of the service are a key factor in determining whether advice is personalised. FMA considers that advice provided on a one-to-one basis where a small number of questions are answered by the client to ascertain a risk profile allocating a customer to one of a small number of pre-determined classes of person may be class advice. Beyond this, applying the factors in the guidance note, FMA is likely to conclude the advice service is personalised.
  • personalised advice - advice that is tailored to the client, taking into account the client's situation or goals. For example, analysing a client's retirement goals and recommending a particular investment portfolio to match these goals. Personalised advice about KiwiSaver does not necessarily require the same level of analysis of all of the client's circumstances as an investment planning service. The analysis could focus on information relevant only to the particular KiwiSaver scheme's suitability for the client.

The guidance note explains FMA's views and gives practical illustrations. It also explains:

  • When determining its service approach, the distributor should consider the needs and reasonable expectations of its target clients.
  • Robust controls are required to ensure sales people operate within a chosen service approach.

Submission process

Please email your feedback and provide it in both PDF and word documents. The e-mail subject line should identify that the email contains a submission on the sale and distribution of KiwiSaver, and who the submission is from, eg 'Submission on sale and distribution of KiwiSaver by [submitter's name]'.

We are particularly interested in comments on the practical effects of our interpretation and the time which firms which have taken different interpretations may need to adjust their processes and procedures.

The deadline for submissions is 5 pm Monday 16 July 2012.

We will not treat any part of your submission as confidential unless you specifically request we do so. Submissions will be subject to the Official Information Act 1982. We may make submissions available on our website, may compile a summary of the submissions or draw attention to individual submissions in internal or external reports.

If you would like us to withhold any commercially sensitive, confidential or proprietary information included in your submission, please clearly state this in your submission and identify the relevant sections. We will consider any request to have information withheld in accordance with our obligations under the Official Information Act.

File Attachments

guidance-note-kiwisaver-sale-and-distribution-june-2012.pdf (438 KB)