Financial Advisers Act Review - why not make a submission?

The Financial Advisers Act 2008 came into force in 2011 in New Zealand.  It established a range of 'designations' and regulatory rules for financial advisers. The three core designations are:

Authorised Financial Adviser (AFA)  Carey and Peter Church are AFA's, Paul Swarbrick is studying to become an AFA (he is currently an RFA.) There are around 1800 AFA's and these are the only advisers that can give advice on investments (unless you talk to a QFE adviser, who can talk to you about their QFE employers investment products). An AFA adviser has to hold a certain level of qualifications, requires testimonials and a 'good character check' to become an AFA and is required to abide by the Code of Conduct.  Amongst other things, the Code requires a minimum level of Continuing Professional Development each year.  There are extensive disclosure obligations on AFA's to clients.

Registered Financial Adviser (RFA)  These advisers can only advise on 'Category 2' financial products, which do not include investments (unless they are providing 'class' advice on KiwiSaver as an example).  The only pre-requisite to becoming an RFA is a criminal check and an application and payment of fees.  It is estimated that there are around 6500 RFA's.  They are not required to abide by the Code of Conduct. RFA's have a statutory primary disclosure document that they are required to provide to clients.

Qualifying Financial Entity (QFE) The biggest group of 'advisers', it is estimated that there are around 23,000 employees of QFE's that talk to people about their finances.  These are mainly banks, and large insurance companies like AMP and Sovereign.  The QFE is regulated and is responsible for the activities of it's QFE 'advisers' and there are very limited disclosure requirement (for the QFE only), and no requirement to abide by the Code of Conduct. There are currently 57 QFE's in New Zealand.  A list of QFE's can be found by clicking here.

All people dealing with financial advice as defined in the Act are required to be registered on the Financial Services Providers Register.

Why is there a review of the Financial Advisers Act?

The Act was changed significantly during drafting.  Only a few clauses in the Act were retained from the initial Bill. The need for legislation was highlighted by the Financial Intermediaries Taskforce, that was set up in 2004 and reported back in 2007.

As a consequence of the changes during the drafting stage, a Ministerial review of the effectiveness of the Act was required at the 5 year anniversary of the Act.

This review is currently in progress.  Here is the official comment on the need for the review:

"Both the Financial Advisers Act 2008 and the Financial Service Providers (Registration and Dispute Resolution) Act 2008 were designed to help consumers make informed decisions and to ensure our capital markets function well."

"The FA Act had a lengthy development process, in which significant changes were made to the regulatory model and the scope of regulation. In addition, there have been substantial changes to the market and to the rest of the regulatory environment since it was passed in 2008. The difference between the current FA Act and the original framework is a key reason why this review seeks to re-evaluate the role of advice and principles behind regulatory intervention."

Making a submission

At Moneyworks, we have spent quite a bit of time formulating our submissions to the Act and we are pl;anning on making three submissions in total (one each from Carey, Peter and Paul.)  As with all submissions to Government Consultation, there is no requirement to comment on every question.

There are 82 questions in the consultation document. The consultation document is attached here for your reference, along with the template to submit answers on.  15 05 final-issues-paper-20-may-201515 06 TEMPLATE Submissions FAA Review Final

However MBIE who are running the consultation also want to hear from consumers about their experiences with their financial advisers.  The more information they have, the more they will be able to understand what is going to work best with Financial Adviser Regulation.

We encourage you to send an email to MBIE as a 'submission' if you have any comments to make about advisers, or the regulation that you know about.  Any genuine comments would be helpful to the policy advisers.

The submissions close at 5pm on 22nd July 2015.

This is how you make a submission:

Please use the submission template provided at www.mbie.govt.nz/what-we-do/faareview as this will help us to collate submissions and ensure that your views are fully considered.

Please also include your name, or the name of your organisation, and contact details. You can make your submission:
• By attaching your submission as a Microsoft Word attachment and sending to faareview@mbie.govt.nz.
• By mailing your submission to:

Corporate Law Labour and Commercial Environment Group

Ministry of Business, Innovation & Employment

PO Box 3705

Wellington New Zealand

Please direct any questions that you have in relation to the submissions process to: faareview@mbie.govt.nz.

If you have any questions or comments, contact us by email at carey@moneyworks.co.nz

If you have any thoughts or opinions that you would like to share, visit us at our Twitter, Facebook or Linked In pages, and comment.

For more blog entries that you might be interested in:

Moving Office – Going Virtual

The Value of Investment Conferences

Milford $1.5m settlement with FMA

By Carey Church




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