Financial Advice New Zealand has been left disappointed by the Select Committee’s review of the Financial Services Legislation Amendment Bill (FSLAB), which it says has “fallen short of the mark for both Kiwis and the advice profession.”
The group has urged Minister Kris Faafoi to revisit the Bill and to look particularly carefully at the divide between sales and advice, and at the various types of advisers it deals with.
The risk of lowering professional standards was also highlighted as an issue, along with a prevailing lack of certainty around the impact of the new regime on small adviser businesses.
“In our submission we highlighted that to support good outcomes for Kiwis, we must provide clarity and ensure the public understands the difference between sales and advice, and the various types of advisers,” said Financial Advice New Zealand CEO Katrina Shanks.
“As it stands, the Bill only provides a definition of regulated financial advice but is silent on the definition of ‘product advice.’ The decision could have been made in the Select Committee, and could have provided a stronger framework for the code – and for Kiwis and advisers – on this crucial line in the sand.”
“While the code will set the standards, the Bill sets the tone,” Shanks explained. “The public deserves to know that the advice they receive is from a person held to consistently high standards right across the industry – the current Bill leaves room for standards to be set at the lowest common level.”
Shanks says the group’s submission emphasised the importance of small adviser firms in ensuring that all New Zealanders have access to financial advice; however, the Bill has failed to clarify any potential costs or business impact the new regime might have on these businesses, leaving them in a state of uncertainty. This may ultimately lead to a smaller pool of businesses, and less choice of financial advisers.
“On these issues, the Bill does not reflect the core purpose of the original legislation,” Shanks said. “We will be meeting with Minister Faafoi within the next couple of weeks to talk about the changes that could be made to the bill. The Committee really had an opportunity to make a difference, and they haven’t.”
Financial Advice New Zealand has nonetheless praised certain aspects of the review, saying it will be “welcome news” for Kiwis. Among these are the strengthened resolve to give priority to client interests, the incorporation of KiwiSaver schemes into the regulated financial advice regime, and the requirement that a licensee meets the criteria to offer financial services.