The Ministry for Business, Innovation and Employment (MBIE) has released a discussion paper on disclosure requirements in the new financial advice regime.
The proposed regulations intend to make it easier for consumers to understand the whole picture when receiving financial advice.
Commerce and Consumer Affairs Minister, Kris Faafoi, says the discussion paper seeks feedback from industry and consumers on what information should be given to consumers in relation to financial advice.
“I want consumers to make the best decisions they can during their financial planning so ensuring important information is available and easy to understand is crucial.
“For example, information hidden in fine print isn’t helpful to consumers – that might be information about commissions or incentives that the provider receives, and the fees that will be charged.”
He said those seeking financial advice should have access to that information to help them in deciding from which provider to seek advice.
The discussion paper proposes that the following information be disclosed to the consumer at three different points in the advice process:
1. Publicly available or on request:
- Details about their licence
- The conduct and client care duties that they are subject to
- Information about their complaints process and the details of the dispute resolution scheme of which they are a member
- A general description of the limitations in the nature and scope of the advice that can be given
- Whether they charge a fee for giving financial advice
- Whether they pay or receive commissions and other incentives, and whether there are any conflicts of interest, which could materially influence the advice that they can give.
2. When the nature and scope of financial advice is known:
- Information relating to any relevant disciplinary history of the individual giving advice or their employer
- Details regarding the nature and the scope of the financial advice that the individual or firm will provide, including the providers whose products they will consider
- Details of any particular material commissions or incentives that they, or their employer, might receive and details of any particular material conflicts of interest
- A reasonable estimate of the fees, and the basis on which they are charged
- Any relevant insolvency or bankruptcy history of the financial advice provider or financial adviser.
3. When a recommendation is being made:
- Confirm if there have been any material changes to the nature and scope of the advice (e.g. if only a limited number of the products available to the person giving advice were considered)
- Confirm the particular material commissions or incentives that will apply and any particular material conflicts of interests
- Confirm the extent of any additional expenses that the client might incur (e.g. repaying clawback commissions).
It also included additional points of disclosure which you can read in the full discussion paper at this link.