Minister sets out new disclosure requirements for advisers

Recommendations for new disclosure requirements for financial advisers were released today in a cabinet paper, which was provided to the Cabinet Economic Development Committee by Minister Kris Faafoi.

The paper sets out the regulations it would like to see applied to the new financial advice regime being implemented this year, which includes an obligation to provide the client with the following information:

• The licence they are operating under and their code of conduct
• The type of financial advice they are authorised to provide, and whether this is limited to a specific suite of products
• Any commissions, incentives or conflicts of interest that could “materially impact” the advice given
• Any other fees or costs associated with the service
• Any recent enforcement action, including that undertaken by the Financial Advice Disciplinary Committee (FADC), recent civil liability findings, criminal convictions or bankruptcy proceedings
• Their complaints handling and dispute resolution arrangements

The paper also suggests that the advice should be given on an ongoing basis as it becomes relevant to the customer, rather than in an “ineffective” up-front template.

As an example, Faafoi says that if a client requires “relatively straight-forward” advice on a KiwiSaver fund, they may not benefit from receiving detailed disclosures on other types of advice or financial products offered by the provider. He also proposed flexibility in terms of how the disclosure is provided, thus giving clients more choice in how they choose to access financial advice.

“Many New Zealand consumers rely on financial advice to help make important financial decisions, such as obtaining a mortgage or saving for their retirement,” Faafoi stated.

“However, they often have limited information about those giving financial advice, which can prevent them from making confident and informed decisions.”

“The [Financial Services Legislation Amendment Bill] will ensure that consumers are able to access quality financial advice from providers who are required to give priority to a client’s interests, to comply with a code of conduct, and to disclose information to clients. The new regulatory regime is a priority of mine and is important for responding to some of the issues recently identified by the Financial Markets Authority and the Reserve Bank of New Zealand in their conduct and culture reviews.”