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Govt seeks feedback on disclosure rules

Clients will have to be clearly told what fees they are likely to pay, and what commissions an adviser will receive, under draft disclosure regulations revealed by the Government this week.

Friday, October 11th 2019, 5:00AM 2 Comments

The Ministry of Business, Innovation and Employment (MBIE) has issued its draft regulations, seeking feedback on the disclosure requirements that will sit alongside the new financial advice regime.

The first requires any financial advice provider to keep a record of every disclosure made in accordance with the rules.

Then, as a matter of course, MBIE suggests advisers make publicly available the licensing status of their FAP – including a brief summary of any conditions that might limit the advice that can be given.

The adviser would also have to give information relating to the type of financial advice the FAP gave, products advised on and any limitations, including product providers dealt with.

They should also explain the fees that could be charged for advice, as well as any conflicts of interest, including an explanation of the circumstances in which a commission might be paid.

Advisers would also have to give information about their own internal complaints procedure and external dispute resolution process.

When the nature and scope of the advice became clear with a client, MBIE suggested advisers give the same licensing information, information about the types of advice that would be given, and products advised on, including any limitations on the process.

Advisers should also offer information regarding any recent instances of being publicly disciplined, relevant convictions or civil proceedings and, in the case of financial advisers, any recent bankruptcies or insolvencies.

MBIE said they should also give information identifying the FAP, and adviser or nominated representative. They would also give a break down of the fees to be paid, including the amount due if it was known, or an estimate if it was practicable.

They should also give a description of conflicts of interest, including any commissions or incentives that could be paid.

Finally, when advice was given, the adviser should give much of that same disclosure again, including details of fees, and commissions.

They would also have to give the client a description of their duties under the Financial Markets Conduct Act.

MBIE said feedback on the paper would help to finalise the regulations before they were submitted for approval.

"We are aiming to pass the regulations in early 2020, and they will come into force in June 2020 along with the rest of the new regulatory regime. We are also seeking feedback on whether the regulations will need to include transitional provisions to give the industry sufficient time to meet the new disclosure requirements."

Financial Advice New Zealand chief executive Katrina Shanks said increased transparency was welcome.

“Though we generally support the proposed requirements around record-keeping regarding disclosure made to clients – including on conflicts of interest on commissions and other incentives, disciplinary issues, and about what advice an adviser is licensed to provide – in our view some of them need further consideration and development, and we will be providing feedback on them.
“Many advisers, of course, already do much of this, but making it a requirement for all advisers will be a good thing for clients and for building public confidence and trust in the sector.”

You can read the paper here. Submissions close November 8.

Tags: compliance Disclosure FAP Financial Advice New Zealand Financial Markets Conduct Act FSLAA Katrina Shanks licensing MoBIE regulation

« Legislation overload 'could have unintended consequences'Mann on a mission to diversify financial advice »

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Comments from our readers

On 11 October 2019 at 1:44 pm LNF said:
End result a camel that was a horse designed by a committee
On 12 October 2019 at 2:01 pm JPHale said:
So much for MBIE’s disclose as you go and keep it simple comments to advisers in the face to face meetings. It's turned into burying clients in multiple copies of the same information they already could care less about.

I agree with the need for transparency and equality of requirements across all advisers, but for many clients the added level of multiple copies of paper created has the potential to get clients to the ’it's too hard’ point far faster than we presently see.

Client's not taking action because the process is too ’hard’ is already an issue.

Every insurance adviser already experiences this when they pull out the 40-page application and the client's roll their eyes... About the only advantage to e-apps, the client can't see how long it is until they're well into it and it's too late...

We have a ’now’ right now society and we’re adding more to the pile. Frankly, it is likely that the outcome of this is less coverage in the community or more the point the cover that is taken is more DIY or inappropriate because it's ’sold’ and doesn't have a whole lot of advice paperwork added to the burden...

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