A new code of conduct will come into force with the start of the new Financial Services Legislation Amendment Act regime.
It replaces the existing code, which applied only to AFAs. That was written and administered by a code committee chaired by David Ireland, a partner at Kensington Swan.
He said the code committee had met a couple of times “behind the scenes” as work progressed to the new laws taking effect and had talked about the current code and the new version, and whether the code working group had come up with anything the previous code should have covered.
“It’s a different regime. The new code, with the FAP overlap, entity provision of financial advice, was always going to be different,” he said.
“Maybe we should have been less prescriptive in what we had in the current code but each of the code standards were included for a particular reason.”
The code committee had had to strike a balance and provide advisers with a steer as to what it was looking for, he said.
“The feedback from MBIE was that the current code is one of the few things that was actually working quite well under the current regime.”
He said it was ironic that, in an environment of increasing focus on customer outcomes, there was not a specific client-first element in the new code. It requires advisers to treat clients fairly, act with integrity, give advice that is suitable and understood and to prioritise client interests in cases of conflict.
The existing code says advisers must place the interests of the client first and act with integrity. “Putting the client first where there is a conflict is a much narrower concept,” Ireland said. “That’s an element that hasn’t flowed through.”
He said he would have liked to have seen a set number of hours for CPD and for the unit standard that covers knowledge of New Zealand laws to be a requirement for individuals providing financial advice.
Ireland said that over the three versions of the code in five years, the code committee felt it had got it right. “There are fewer elements to go wrong in the new code but it’s often not until you are down the line and apply things in practice you realise that it isn’t working as independent challenges are identified that need to be worked through.”
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