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What the CoFI review means for advisers

MBIE is currently undergoing an industry consultation on whether the CoFI bill should apply to financial advisers, Good Returns digs into the details.

Monday, May 3rd 2021, 6:51AM 1 Comment

by Daniel Smith

MBIE has reopened industry consultation into “outstanding aspects of the upcoming regime governing conduct in the financial sector”, including the controversial CoFI bill.

Currently financial advisers are viewed as “intermediaries” who are bound by the conduct standards outlined in the bill. But financial advisers already have conduct standards as a part of the new FSLAA regime implemented on March 15.

The MBIE discussion document acknowledges this stating “overlap with or duplicate the regulation of financial advice under FSLAA”, as one of its key concerns.

Financial Advice New Zealand CEO, Katrina Shanks, is one of the voices calling for MBIE to remove advisers from the CoFI bill.

“CoFI was designed as fair conduct principles for financial services, financial advisers have been scooped up in this. The issue is that financial advisers have their own conduct and culture legislation under FSLAA.

“The definitions of the CoFI bill should not be so wide as to mean that financial advisers have conduct and culture responsibilities under two separate bills.”

The discussion document reveals that this is one option on the table, with MBIE looking to “impose a more limited range of requirements on financial institutions in relation to intermediaries that are licensed financial advice providers”.

But this would not mean that advisers are completely off the hook from CoFI.

Another central aspect of the bill is its treatment of sales incentives.

The MBIE document proposes that regulations on volume based sales incentives “should apply to all employees, agents and intermediaries of a financial institution or intermediary that are offering, giving, or receiving an incentive based on volume or value based targets.

“The incentives regulations would apply regardless of whether the person who would be otherwise eligible for the incentive is in a customer-facing role such as sales, or in a managerial or executive position.”

According to MBIE, one of the big challenges is figuring out how CoFI and FSLAA should “fit together to achieve the best outcomes for consumers”.

In response to this challenge, MBIE has proposed two changes to CoFI.

The first is to amend the current definition of “intermediary” in the bill to capture only persons involved in the sale or distribution of a financial institution’s relevant service or associated products.

The second is to narrow the obligations that apply to financial institutions in respect of “intermediaries” to minimise compliance cost and duplication of regulation while still ensuring financial institutions take appropriate responsibility for consumer outcomes.

Parties interested in contributing to the consultation can do so HERE.

Tags: CoFI FSLAA MBIE regulation

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Comments from our readers

On 4 May 2021 at 5:12 pm All hat no cattle said:
CoFI
Not CoFA - I am an Adviser.
Not an Institution.
I have rules. They have rules.
Only a pointy-head from a bureaucracy could invent a way to make that un-workable.

New Name: CoFIIOGoRi?
(Conduct of Financial Institutions or Intermediaries that are Offering, Giving, or Receiving an Incentive)?
Better known as Conduct of Virtually Financial Everything (institutions) and Financial Everyone (advisers) - CoVFEFE lol

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Last updated: 12 May 2021 1:49pm

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