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Kris Faafoi
He has given approval to the final draft of the code.
“Having access to good quality financial advice makes a big difference in people’s lives. It means they can more easily reach their financial goals, including saving for a first home or enjoying their retirement. Small changes to your financial planning now will accumulate and can make a big difference – and we want all New Zealanders to receive these benefits.
Faafoi says anyone giving financial advice to consumers will need to act fairly and with integrity when they give advice, and to meet a minimum standard of competence. Businesses that provide financial advice will need to be licensed.
“We want consumers to have confidence that people advising them about their finances are prioritising their interests, are competent and are following professional standards.”
Faafoi says finalising a new financial advice code complements other work under way to ensure consumers are at the heart of decision-making when they access financial services. The Code of Conduct fits within the Financial Services Legislation Amendment Act that was passed in April to make financial decisions easier for consumers. It also complements work underway to provide more protections when consumers use banks and insurance companies.
“Serious issues were identified by the FMA and RBNZ in their recent reviews of the banking and life insurance sector. The code, alongside the new financial advice legislation, will help address those issues by ensuring consumers’ interests are much better served. The Government is also fast-tracking measures so that consumers get a fair deal from banks and insurers, and is currently seeking feedback on options to achieve this.”
The Financial Advice Code Working Group was appointed in mid-2017 to develop the new code, and Faafoi thanked the group for their work.
The code, along with the new regulatory regime for financial advice, is expected to come into force in mid-2020. Businesses will have at least six months to get a transitional licence, and a further two years to become fully licensed and meet the competency requirements.
More to come.
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The Code as finalised is a much slimmed down version of what we saw in October last year. I think it is also much more benign.
They have got rid of a lot of things from previous draft that we thought were crazy; for example
ridiculous examples removed and not replaced
no more obey "spirit of code"
no more "do the right thing"
"act in clients interest" doesn't sit there naked in Std 1
CWG resisted desire to insert aspirational statements so thankfully no AP&M.
changed "minimum standards" to just plain simple standard.
They got rid of three whole draft standards; COI and disrepute standards removed and each concept gets only 1 phrase in Integrity standard; Complaints standard deleted
There are a few areas that I think will create problems going forward - no guidance as to how an adviser will be able to demonstrate to satisfaction of regulators an alternative qualification. Good luck anyone planning on that route.
Elephant in room of replacement business (especially the VIOs selling life and health policies) was left completely alone.
I reckon the penultimate paragraph in Std 3 will have perfectly foreseeable impacts although the bureaucrats will describe them as "unintended consequences " - it says that if the advice includes a comparison between 2 or more products, the advice should be based on an assessment of each product.
Now apply that to life insurance advice where tha adviser shows an 8 company comparison of premiums - I can't imagine that the adviser currently provides the client an analysis of all 8 companies!
I reckon quote comparisons could become extinct.
Final comment - I might have missed it but it would be interesting to know if FMA or Minister required any reconsideration of what was originally presented to him, and if so, what.