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New financial advice regime

Improving access to quality financial advice for all New Zealanders

The Government has announced changes to how financial advice will be regulated in New Zealand. The changes are designed to make quality financial advice more accessible for all consumers and investors.

These changes affect all businesses and individuals currently offering financial advice and investment planning services, and individuals providing a discretionary investment management service. 

Key changes

Anyone providing financial advice to retail customers will need to:

As a result of the changes to the regime:

  • the current types of advisers (AFA, RFA, QFE adviser – each with different standards) will be removed
  • advice can only be provided by or on behalf of a financial advice provider (FAP). A FAP can provide advice:
    - through a financial adviser (FA) – a person engaged by a FAP and registered on the FSPR
    - through a nominated representative (NR) – a person engaged by a FAP to provide advice on their behalf, but not registered on the FSPR or
    - directly online (ie digital advice)
  • FAPs can be individuals or businesses
  • the distinction between ‘class advice’ and ‘personalised advice’ will be removed
  • the requirement that advice can only be provided by a natural person will be removed
  • the Financial Advisers Act 2008 will be repealed.

Process

The sequence of events for passing of the legislation through to development of the Code of Conduct and Regulations, including transitional arrangements, is as follows.

Step 1

Financial Advice Code Working Group begins developing new Code of Conduct – (commenced August 2017)

Step 2

Bill referred to Select Committee

Step 3

Bill passed

Step 4

New Code of Conduct approved by Minister, new regulations developed, consulted on and finalised

Step 5

After the new Code of Conduct is approved, there is a three month period before transitional licensing applications open for financial advice providers. Transitional licences, when granted, will allow FAPs, and all financial advisers and nominated representatives engaged/employed by them, to continue providing financial advice during the two-year transitional period.

Step 6

Full licensing opens six months after transitional licensing opens.

- All financial advice providers must hold a transitional licence
- To continue providing advice, all financial advisers and nominated representatives must be engaged/employed by a financial advice provider with a transitional licence
- New regime and new Code of Conduct comes into effect
- All new obligations and duties apply
- Competency exemption comes into effect. If financial advisers or nominated representatives have not met the new competency standards, they may provide the advice they were legally allowed to prior to the new regime coming into effect while they work towards achieving the new competency standards
- Full licensing opens
- Financial Advisers Act repealed
- FMC Act and FSP Act amended to reflect new regime

Step 7

After two years, the transitional period ends. All financial advice providers need to have a full licence to continue providing financial advice.

Our role

We will be responsible for licensing and monitoring all financial advice providers. We’ve started engaging with industry to help people understand what they may need to do to prepare, and we plan to continue this over the coming months.

We will provide more information as soon as we can about licensing and our approach to ongoing monitoring and supervision.

Five things you can start doing now

    1. Find out about the key elements of the new regime and the indicative timeline for key milestones- see MBIE and Parliament websites.
    2. Think about what these changes may mean for your business and clients – ie opportunities and challenges
    3. Consider your medium - long term business plan. What does this mean for any succession planning?  (a succession plan is essential if you’re thinking of selling or taking a back seat role).
    4. Identify and engage the best resources to help you with your decision making, - this may include your professional adviser association, product providers, legal adviser etc
    5. Begin formalising business processes/procedures and continue your learning and development

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