New advice regime requires advisers to complete investment qualification

by Roxanne Libatique13 Jan 2020

Registered financial advisers (RFAs) will be required to complete an investment qualification to continue providing KiwiSaver advice under the new advice regime.

At the moment, a number of RFAs can offer assistance with KiwiSaver by offering class advice, but the new rules indicate that class advice will no longer be an option and advisers need appropriate qualifications for the service they offer.

“Any adviser not relying on the competency exemption, or giving advice after June 2022, must meet the competence knowledge and skill requirements set out in the new Code of Professional Conduct for Financial Services before providing such advice,” a spokesperson for the Financial Markets Authority (FMA) said, as reported by Good Returns.

“For example, if the type of advice provided falls under code standard 7 then the investment strand is required. If the type of advice provided falls under code standard 8 then the most relevant specialist strand is required for each financial advice product type. In the case of recommending KiwiSaver or switching funds within a KiwiSaver scheme, the most relevant specialist strand is the investment strand (or equivalent as per the code.”

Read more: More Kiwis are dealing with lifelong mortgages

Peter Cave, managing director of adviser group Lifetime, highlighted the importance of completing the investment qualification.

“KiwiSaver is being sold as a commodity currently, where it should be delivered as a retirement and wealth accumulation strategy, particularly given the balances that will accumulate over time. While some may challenge the need to do the investment strand, consumers will ultimately demand higher levels of investment advice, not just a sales process,” he said.

Katrina Shanks, chief executive of Financial Advice NZ, said some mortgage advisers had argued for the exemption of KiwiSaver because they were dealing mostly with first-home withdrawals.

“However, with the removal of the category of class advice from the legislation and with increasing KiwiSaver balances, along with a couple of other arguments, the decision was made to include it as investment advice,” she said. “Obtaining a qualification will give advisers more choices longer term in terms of how they will provide regulated financial advice, and which FAP they will operate within.”

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