More detail on the new regime for financial advisers and service providers is now available, with today's publication of the exposure draft of the Financial Services Legislation Amendment Bill and a consultation document by the Ministry of Business, Innovation and Employment (MBIE).
Under the Bill:
- all financial advisers will be required to put the interests of the client first, to only provide advice where competent to do so, and to comply with a new Code of Conduct. The Code is intended to be in place by August 2018;
- anyone (or any robo-advice platform) providing financial advice will need to operate under a licence granted by the FMA (licences will be granted at the firm level to financial advice firms and to sole traders);
- the requirement for advice to be given by a natural person will be removed, along with the distinctions between class and personalised advice, and between categories of products;
- enhanced disclosure requirements will be set to ensure consumers receive core information such as remuneration (including commissions) at the time most relevant to their decision making; and
- a greater connection to New Zealand will be required to be registered on the Financial Service Providers Register.
MBIE is seeking feedback on two key issues:
- whether the Bill achieves its policy intentions and whether there are any unintended consequences; and
- the proposed transitional arrangements for industry participants to move into the new regime.
MBIE is currently proposing that the new regime will take effect in February 2019, being six months after the Code of Conduct is approved. The Bill proposes two key stages for transition:
- anyone providing financial advice will need to be engaged by a firm with a transitional licence six months after the Code of Conduct is approved; and
- all transitional licences will expire two years later, and full licences will be required by then.
All financial advisers, brokers, QFEs, and financial service providers should review the Bill and take this opportunity to identify any issues that it raises.
The bill and the consultation document are available here. The consultation period closes on 31 March 2017.
Chapman Tripp is considering the Bill and will publish a more detailed overview together with our thoughts on the key changes in the Bill shortly.
Our team of financial services experts would be happy to assist anyone who wishes to make submissions on the Bill or who would like advice on the implications of the new regime for their business.