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Draft new code revealed

It should get easier to provide limited advice to clients under changes to the Code of Conduct for Financial Advisers.

Friday, January 22nd 2016, 6:00AM

by Susan Edmunds

Consultation was launched late last year on a draft revision of the Code. An exposure draft of the revised version was released yesterday.

The Code Committee said a number of submissions received, and the recent Options Paper released by the Ministry of Business, Innovation and Employment as part of its review of the Financial Advisers Act (FAA), highlighted the problem of consumers being unable to access limited financial advice.

"Personalised advice on discrete issues [is] either proving costly to provide or not provided at all," the Committee said.

"The overwhelming impression conveyed through the consultation process is that the transactional advice mechanism has not been effective in improving consumer access to personalised advice."

The Committee is proposing some significant changes to remedy that.

It wants to replace the "transactional advice" concept with a wider "limited advice" idea, with relief from the need to assess suitability when advice is requested on a particular product, without a transactional element.

The client must either initiate the identification of the financial products, or already hold them.

AFAs would then have to satisfy themselves as to suitability of any financial product recommended to address any stated goal, so suitability relief under this heading would be restricted to assessing suitability in light of a client’s financial position and circumstances.

AFAs would need to confirm to the client, in writing, that the financial advice provided could have been different had advice not been requested on a limited basis.

The Committee said this would be a better balance of consumer protection and accessibility of advice.

The Code has also been tweaked to reflect new qualification standards. Advisers must now attain components of the NZ Certificate in Financial Services level 5 that are relevant to their work.

It also revises the acceptable alternative qualifications.

Feedback was provided to the Committee that the exclusion of product training provided for the principal purpose of promoting a particular financial product from the definition of structured professional development was unduly restricting what could be counted.

The Committee said it had sympathy with this concern and valuable training should be able to be counted.

"This could be achieved by deleting the exclusion from the defined term altogether. To reinforce the integrity of the training AFAs might then seek to include as structured professional development, a requirement for AFAs to include learning reflections in their CPD records, similar to the requirement currently imposed on lawyers, might then be included."

The Committee asked for feedback from the industry on this idea.

Submissions are open until February 23.

The Committee will then give its recommendations to the FMA.

Chairman David Ireland has previously said changes to the Code will be limited because of the potential overhaul of the FAA this year.

Tags: Code Committee financial advisers

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