To work out which type of adviser you are (or want to be) you need to think about:
This flowchart helps you decide what type of financial adviser you are, and whether you have to register or not.
Making a recommendation, or giving an opinion about acquiring, holding or disposing of a financial product. Providing factual information only about a financial product, in the absence of any recommendation or opinion would not be considered financial advice.
For more information see s10 of the Financial Advisers Act 2008. The Guidance Note: Sale and Distribution of KiwiSaver focuses on factors FMA will take into account when considering whether advice is given on KiwiSaver, and, if so, whether the advice is class or personalised.
Designing or offering to design a plan that:
The focus is on the investment nature of the service, rather than the product recommendations arrived at.
For more information see s11 of the Act.
Deciding which financial products to buy and/or sell on behalf of a client, e.g. you are authorised to manage a client's investment portfolio.
The type of clients an adviser works with affects the type of adviser they are, and what they need to do to comply. The types of client are retail and wholesale.
Retail clients are any clients who are not considered 'wholesale' clients. Wholesale clients are defined in s5C of the Financial Advisers Act 2008.
The type of adviser you are, and what you need to do to comply, will partly depend on whether you offer a personalised service or a class service.
A personalised service is one that is given to a client who is readily identifiable by the adviser and, either the adviser has taken the person's individual situation into account, or the client would expect their individual situation to be taken into account. For more information see s15 of the Financial Advisers Act 2008.
In the case of a DIMS, the service is a personalised service or a personalised DIMS if:
a) the service is provided to a named client of a client who is otherwise readily identifiable by the financial adviser exercising the investment authority under that service; and
b) the investment strategy implemented in, or to be applied under, the investment authority has been designed to take account of the client’s particular financial situation and goals or any 1 or more of them (rather than merely being customized from an investment strategy that applies to a class of clients, for example, by selecting options or making minor changes to the class strategy or authority).
This is anything that is not a personalised service, e.g. brochures, seminars and internet material targeted towards a wide class of people rather than an individual. For more information see s15 of the Act.
AFAs, QFE Advisers and registered individuals or entities can all provide class service to retail clients, irrespective of which category of product the advice is about.
Note that advice provided about a class of products is not financial advice and is outside the regulatory scope of the Act. (See section 10.) This is a different concept than class service which is covered by the Act.
Category 1 and 2 products are described in s5 of the Financial Advisers Act 2008. Some category 1 and category 2 products are defined further in regulations. Additional products may be added to each category in the future, by regulations.
Only AFAs and QFE advisers can give personalised advice to retail clients on category 1 products. QFE advisers are limited to advice on category 1 products promoted or issued by their QFE.
Personalised advice on category 2 products can be given by RFAs and QFE Advisers. However, if advice on category 2 products is given as part of providing an investment planning service, then the adviser must be authorised as well as registered.