Commerce and Consumer Affairs Minister Kris Faafoi says New Zealanders should have better access to quality financial advice as a result of changes in the Financial Services Legislation Amendment Bill, which passed through Parliament today.
“According to the Commission for Financial Capability, 68 percent of New Zealanders have money worries. Many are overwhelmed by the sheer volume of financial choices they need to make and the complexities in understanding financial language is often a barrier to making decisions.
“The changes we will now put in place through this legislation are designed to make it easier for people to get advice, to better understand their options, and to ensure advice is of a consistent quality.”
Mr Faafoi says the Bill will improve transparency in the financial advice sector to better serve consumers’ interests.
“Financial advisers will be required to prioritise the customer interest, meaning their foremost consideration when recommending a product is how well it meets their customer’s needs. This will help address the problem of some advisers being incentivised to recommend a particular product because it has a higher commission attached to it.”
Financial advice providers will be accountable for the advice provided to customers on their behalf, and will need to disclose key information to clients so they can make informed decisions.
“Anyone providing financial advice to retail clients in the new regime will require a licence granted by the Financial Markets Authority. People providing financial advice will also need to meet new competency standards and comply with a professional code of conduct, which I expect to finalise in the coming months.”
To ensure consistency in the standard of financial advice provided across the industry, the same basic protections for consumers will apply regardless of how they choose to access financial advice – whether that be in person or online.
Mr Faafoi says the Bill is an important first step in the Government’s work to tackle the types of issues raised by recent reviews into the banking and insurance sectors in New Zealand and Australia.
“I’ll soon be considering changes that might be needed to the broader conduct of financial institutions, and will be consulting on options in May this year. These broader changes will work alongside the improvements made in this Bill to ensure consumers can have confidence in the financial services sector.”
Other measures in the Bill include a requirement for businesses to have stronger links to New Zealand in order to be registered on the Financial Service Providers Register.
“I know that some offshore firms have been registering in New Zealand as financial service providers to give the misleading impression they are subject to regulatory oversight in this country. The changes in the Bill will prevent that from happening.”
The new regime for financial advice is expected to come into effect in the first half of 2020, with applications for transitional licences opening later this year.
Mr Faafoi says the Bill includes transitional arrangements for the industry.
“Collectively, all of these changes will support better outcomes for consumers and, importantly, provide certainty to the financial services market. It has been challenging for everyone involved but we are very close to a set of workable solutions for the sector that keep good customer outcomes top of mind and ensure consumers can still access financial advice.”