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Code changes likely by year's end

A new code of conduct for authorised financial advisers has been submitted to the Financial Markets Authority (FMA) for approval and is likely to come into force by the end of the year.

Friday, May 27th 2016, 6:00AM 1 Comment

by Susan Edmunds

The Code Committee for Financial Advisers has formally recommended a revised draft Code of Professional Conduct for Authorised Financial Advisers to the Financial Markets Authority (FMA).

The Committee is now working on an issues paper to explain the changes and respond to the final submissions received in the last consultation round. This paper will be released in June.

Key changes include recognition of the new qualifications available for advisers and moves to make it easier to offer limited advice.

The code includes a new requirement for advisers to attain the components of the New Zealand Certificate in Financial Services (level 5) that are relevant to their work, and significant changes made to Code Standard 8, which covers suitability of advice.

The committee had wanted to address problems around the provision of advice to clients who did not want a full personalised service.

Under the new code standard, advisers are required to clearly and effectively communicate the nature and scope of a personalised service. An AFA has to take reasonable steps to ensure the client is aware of the extent of any limitations on the scope of their service, and the implications of that.

"Where a class service is provided, the client can be taken to have agreed to the nature and scope of the service, although the AFA must still take reasonable steps to ensure the client is aware of the limitations of the service provided."

The committee had earlier said the existing standard, requiring advisers to ensure they had an up-to-date understanding of the client's financial situation, needs, goals and risk profile, was too prescriptive.

Committee chair David Ireland said the consultation process for the changes had been effective.

“We are very pleased with where the final recommendation has landed, and hope that the changes made to the client care standards will make a real difference in increasing the accessibility of personalised financial advice.”

Assuming that the draft Code is approved by the FMA, and subsequently by the Minister, the Committee anticipates that the revised Code will come into force by the end of the year.

All authorised financial advisers are required to comply with the code which sets minimum standards of competence, knowledge and skills, ethical behaviour, and client care. It also specifies minimum requirements for continuing professional training.

Tags: Code Committee

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Comments from our readers

On 26 June 2016 at 5:43 pm Murray Weatherston said:
Is there any update on when the Code Committee will issue its paper? We're almost at the end of June.

Second, why should it potentially take until the end of the year for the New Revised Code to be implemented. If the full time was taken, that would mean the approval process (FMA to consider, pass through to Minister and Minister to come to a conclusion) would have taken 7 months. Surely it's not rocket science!

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