Natalie Cameron
by Susan Edmunds
Natalie Cameron
Recommendations for a new version of the Financial Advisers Act were released yesterday, and include a level playing field for all advisers, who will all be subject to a code of conduct covering competency and conduct requirements. All will have to put clients first.
The Ministry of Business, Innovation and Employment said it did not recommend a commission ban as part of the FAA review because that would not be a "silver bullet" to improve the quality of advice.
It said commissions themselves were not harmful, and were just a means of funding the distribution cost of the adviser channel. Removing them could limit consumer access to advice.
A ban on commissions would not directly target poor conduct, it said, because the recent FMA report had shown not all financial advisers had high levels of replacement business, despite all being paid commissions.
It also would not address conflicts of interest for advisers in in-house distribution models.
But MBIE said it and the FMA would monitor advisers' conflict to ensure its measures were sufficient. It may also ask advisers to report on the soft commission they receive and will ask providers to disclose what they offer.
Natalie Cameron, chief executive of AIA, said it was a relief to see that New Zealand was not following the Australian example of heavy commission restrictions.
"It's pretty forward-thinking of the regime here."
AIA would be happy to support advisers who dealt with its products to help them meet higher standards that would be required of those who are currently RFAs, she said.
"I would also expect a significant transition period."
She said it would not be a bad thing to have more focus on the soft commissions offered.
Sovereign chief distribution officer Richard Klipin also welcomed the proposals. He said they seemed to fit into a global move towards higher standards and simplified structures but would represent a fundamental change for the New Zealand market.
He said advisers who were currently RFAs would have some decisions to make about the right business model in the future. "Our role through this is to work with advisers to help them make good and informed decisions."
Naomi Ballantyne, of Partners Life, said the only real disappointment of the proposals was that there were no direct measures to tackle replacement business - but she said that could potentially be governed by the code of conduct.
"It's good to have a code of conduct. I can't understand how you would allow anyone to give advice to anyone on a personalised basis without the requirement to meet standards of behaviour, particularly for financial services. That's something I have felt was missing right he way through."
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