The Government has announced that the new regime for financial advice will come into force in June 2020, with the exact date to be decided on in the coming months.
This encompasses the Act, regulations and Code of Professional Conduct and is when full licensing applications will open.
Licensing fees and FMA levies that will apply in the new regime have also been agreed upon as well as new requirements for registering on the Financial Service Providers Register.
Minister of Commerce and Consumer Affairs, Hon Kris Faafoi, says the new licensing and rules regime will give consumers more peace of mind when dealing with financial advisers.
“The FMA licensing regime and rules are the latest strand of a suite of measures being delivered by the Government to protect consumers. The regulation of financial institutions will help build the trust consumers need on a day to day basis when taking financial decisions,” said Faafoi.
“New Zealanders also want to more easily understand adviser’s expertise, and to know that those who give them advice on their finances are skilled and subject to good regulation supporting good practice. This is good for the sector too because it will drive increasing levels of trust.”
He noted that businesses and individuals providing financial advice now have one year to prepare to meet the new requirements.
He confirmed application fees for licences will range from $612 to $922 for a full licence and $405 for a transitional licence.
Adviser Numbers to Fall
In its recently published Cost Recovery Impact Statement, MBIE forecasted adviser numbers under the new regime.
MBIE noted that under the current regime there are approximately 9095 financial advisers (1,995 AFAs and 7,100 RFAs). Once the new regime is in effect, it forecasts a drop of 909 advisers leaving 8,186 providing advice under FSLAA.
It estimated there will be 2,296 licensed financial advice providers (FAPs) under the new regime.
In its calculations, MBIE stated it made the following assumptions:
- That 90% of current individual AFAs and RFAs will become financial advisers
- That approximately 23% of those AFAs and RFAs will also become FAPs
- That 50% of non-QFE companies that currently engage more than one AFA or RFA will become FAPs
It also assumed:
- That all current QFEs (57 firms) will become FAPs
- That all current QFE advisers will become nominated representatives (21,500 individuals)
Financial Service Providers Register
Cabinet has also agreed to make changes to the registration requirements for the Financial Service Providers Register (FSPR).
These changes will weed out some unscrupulous offshore-controlled operators who have traded on New Zealand’s good reputation by registering on the FSPR to give the impression that they are actively regulated here.
“The Government has been keeping a close watch on the Financial Markets Authority and Reserve Bank review of conduct and culture of banks and insurance companies. The final report on banking is expected soon, but in the meantime I have progressed work on a number of measures so we can get legislation introduced to Parliament this year,” said Faafoi.
MBIE is soon set to consult on the draft disclosure regulations that will apply in the new regime.
Click here to view the Cabinet papers and Regulatory Impact Statements.