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Sharon Corbett
The new disclosure requirements will require businesses and individuals who give financial advice to disclose important information about their services to their clients.
“The disclosure requirements are set in regulations under the Financial Services Legislation Amendment Act, which introduces a new regulatory regime for financial advice,” said Sharon Corbett, manager financial markets at the Ministry of Business, Innovation and Employment.
“They are intended to improve transparency and help consumers with important decisions such as choosing where to get financial advice.
“Information those giving financial advice will need to disclose includes details about fees, the range of products they advise on, whether they have any conflicts of interest or earn commissions, and how to access dispute resolution services.
“This information needs to be provided at different stages of the advice process, including on the company's website, when an adviser meets with a client, and during any complaints process. This will ensure that consumers receive only the information they need, when they need it.”
She said the regulations incorporate feedback on an exposure draft released in October 2019. “In response to that feedback, changes have been made to make the regulations more workable for the range of circumstances in which financial advice is given. For example, the previously proposed requirement to keep a record of each disclosure has been removed, and disclosure of matters like conflicts, commissions, limitations and regulatory actions has been limited to things that would likely materially influence a client's decision.
“The disclosure regulations are a key part of the new regime and it’s important that advisers have time to understand the new requirements and to prepare to implement them before March 15, 2021.”
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Looks like the payment of override commissions to dealer groups (well I guess we should call them dealer groups FAPs now) is about to be brought into the daylight for all consumers to see.
Client - So let me get this right – you get an upfront commission and then a renewal commission in 12 months’ time which is ongoing for looking after me and making sure that my cover remains relevant?
Adviser – yes but the dealer group FAP that I belong to also receives an upfront override commission from the insurer off your policy which can be as much as 30% of the policy’s first year’s API.
Client – Ok I understand why you get paid. You receive a commission because you're a free service to us and you should be remunerated for your time. We really appreciate all that you have done for us organising this valuable cover. But why is this third party who we have never seen or met and hasn’t contributed to any of the advice that you have given us getting any commission off our policy? 30% of what we will be paying the insurance company over the next 12 months is a lot of money! Doesn’t this all impact on the cost of my premiums? I’m not sure I understand why a third party who you’ve mentioned is also overseas owned is entitled to receive any money when they aren’t giving me any advice!
Adviser - ummmm