FMA updates guidance on KiwiSaver sales and advice

Media release
MR No. 2017 – 07
8 March 2017

The Financial Markets Authority today released updated guidance on sales and advice for KiwiSaver providers. KiwiSaver is an important part of New Zealanders’ future financial security and for some it is their first and only investment. This makes it critical that KiwiSaver members get the help they need to make good decisions.

The FMA’s guidance wants providers to encourage investors to consider four factors to help get them on the right track, without the risk of straying into personalised advice. This is a type of advice that can only be given by an Authorised Financial Adviser under the current financial advice regime.

The four factors to help KiwiSaver members are:

• Be in KiwiSaver –A general explanation of how KiwiSaver works and why it is suitable for many New Zealanders.
• Contribute – Choose a contribution rate. This should be enough to get all the member tax credit.
• Right fund – Helping New Zealanders identify the right type of KiwiSaver fund.
• Tax – how to choose the correct tax rate for their KiwiSaver investment.

Providers had told the FMA that earlier guidance was a barrier to full engagement with KiwiSaver members. Providers felt it was too risky to offer any form of advice, without it being viewed as personalised advice, which requires additional steps to be taken by the adviser.

The FMA’s 2015 review of KiwiSaver providers found that for every 1,000 sales or transfers of KiwiSaver, just three were recorded as being sold with personalised advice. Personalised advice includes taking a customer’s financial situation and goals into account.

Liam Mason, FMA Director of Regulation said, “We have revised and updated our guidance to clarify how the different categories of advice can be applied to ensure customers are getting the help they need. We recognise advisers and providers should be confident they are acting within the rules.

“Our primary objective in this sector is for New Zealanders to get the help they need to make good decisions about KiwiSaver. We’ve listened to the industry who told us our previous approach was too restrictive. Now that we have removed a factor providers said was an obstacle, we expect to see more people getting advice.”

The guidance applies the current law about the distinctions between class and personalised advice. Some of the submissions to our consultation on this issue suggested the revised guidance should await completion of the Financial Advisers Act. The FMA thinks there is an opportunity to act now and get a better result for KiwiSaver members.

The guidance also outlines the FMA’s position on provider incentives offered when they sell or transfer KiwiSaver schemes. Incentives should not influence the customer’s good decision-making about their investment. Providers should prompt customers to consider the advantages and disadvantages of transferring between KiwiSaver schemes.

The FMA has released a consumer guide on the key things to consider before deciding to transfer between KiwiSaver schemes.

NOTES TO EDITORS:

Advisers can give customers information only (no advice), class advice, or detailed, personalised advice on KiwiSaver. 

Information only would see an adviser answer basic or general factual questions, but give no advice.

Class advice is a generic recommendation or an opinion that considers pre-defined characteristics such as gender, age and risk profile.

Personalised advice requires knowledge of a customers’ financial situation or goals.

Related links:

• KiwiSaver sales and advice guidance note
• Link to the consultation page including the summary report of submissions and individual submissions

Contact:
Andrew Park
Ph: 021 220 6770
[email protected]