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Financial adviser shake-up welcomed

NZN 12/07/2016 By Paul McBeth

The Financial Markets Authority and New Zealand Shareholders' Association are welcoming proposed changes that will mean all financial advice will have to put the clients' interests first.

Commerce Minister Paul Goldsmith on Wednesday announced proposals to streamline the various adviser designations and impose a blanket obligation for all advice to put the customer first.

He says it will fix an unsatisfactory regime where only some advisers are obliged to disclose potential conflicts of interest and act in their customers' best interests.

FMA chief executive Rob Everett, whose organisation oversees the industry, says the existing regime approached things "from the product and provider perspectives which were very challenging for everybody".

He's pleased to see the proposed changes will put the customer at the heart of the regime.

"The levelling of the playing field, so different types of advisers are subject to a minimum standard of conduct, minimum standard of competence that will hopefully, over time the quality and fair disclosures of advice goes up right across the board.

"Hopefully, it will enable more people who probably ought to be taking financial advice of some description, even if it's quite simple advice, to get advice because actually there's a regime that protects them."

NZSA chairman John Hawkins also welcomed the requirement to put clients first, saying the proposals should simplify requirements and reduce costs, making it easier for a wider range of people to access financial advice.

"Recent FMA research around policy churning in the insurance sector showed this was long overdue and gave the lie to any claims to the contrary."

The details of the amendments are still to be worked out, and Mr Goldsmith intends to go back to Cabinet by September with a view to introducing legislation before the end of the year.

The Ministry of Business, Innovation and Employment predicts consumers will benefit from a simpler regime.

The different adviser designations confused customers. Authorised Financial Advisers are required to meet certain education and ethical standards to sell more complicated products, whereas Registered Financial Advisers need only to sign up to register to sell simpler services, while staff at qualifying financial entities, such as banks and fund managers, are covered by their employers.

Those will be will be replaced by two tiers: advisers, who are individually accountable for meeting their obligations; and agents whose employers are accountable.

The ministry is unsure what impact that will have on the number of advisers in the industry.

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