First Week of New Regime – It’s The ‘End of The Beginning’

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More than 10,200 financial advisers are now working under the new FMA licensing regime which started this week following almost five years of planning.

The regulator says it has approved more than 1,700 transitional licences and nearly 1,000 authorised bodies.

John Botica, FMA Director of Market Engagement, says anyone who is not operating under a transitional Financial Advice Provider licence will need to apply for a full licence. The transitional period, which started on Monday 15 March, gives advisers two years to complete all the competence, knowledge and skill standards required under the Code of Conduct.

Botica says the start of the new licensing regime is the “…culmination of nearly five years’ work aimed at promoting public trust and confidence in the financial advice sector”.

FMA Director of Market Engagement John Botica says financial advisers not operating under a transitional Financial Advice Provider licence will need a full licence.
FMA Director of Market Engagement John Botica says financial advisers not operating under a transitional Financial Advice Provider licence will need a full licence.

Under the new regime, anyone who gives regulated financial advice to retail clients must either hold, or operate under, a Financial Advice Provider licence. All providers of financial advice are now subject to the same obligation to place the interests of their clients first and must adhere to a new Code of Conduct.

Botica says: “We know that this has been a big change for the financial advice industry which has had to adapt, while also dealing with the impact of Covid-19.

“It was encouraging to see so many advisers supporting their clients during the pandemic, while also adapting their business models in line with the new licensing requirements.

“Thanks to all those who have given us feedback as we developed and fine-tuned our approach to this new regime. This input has been invaluable to help us get to this point – which in many ways marks the ‘end of a beginning’.”

Katrina Shanks, CEO of Financial Advice NZ, says it’s been “a long journey” to the start of the new regime.

“It’s encouraging to see legislators, regulators and officials all recognising the value of advice and how important it is for the future of New Zealanders’ financial health, wealth and wellbeing,” she says.

Professional conduct

With the introduction of the new regulatory regime came the Code of Professional Conduct for Financial Advice Services.

The code supports the purposes of the Financial Markets Conduct Act including promoting the “…confident and informed participation of businesses, investors, and consumers in the financial markets, avoiding unnecessary compliance costs, and ensuring the availability and quality of financial advice”.

Download the Code of Professional Conduct for Financial Services.
Download the Code of Professional Conduct for Financial Services.

The code features nine standards:

  1. Treat clients fairly
  2. Act with integrity
  3. Give financial advice that is suitable
  4. Ensure that the client understands the financial advice
  5. Protect client information
  6. Have general competence, knowledge, and skill
  7. Have particular competence, knowledge, and skill for designing an investment plan
  8. Have particular competence, knowledge, and skill for product advice
  9. Keep competence, knowledge, and skill up-to-date

Commerce and Consumer Affairs Minister David Clark says the new regime will give consumers greater confidence to seek advice that will help with their financial goals “…providing them with greater trust in the quality of that advice.”

“The changes will increase transparency by requiring financial advisers to disclose any conflicts of interest, commissions they are paid, and limits on the companies or products they advise on,” says Clark.

“The same basic protections for consumers will apply regardless of how they choose to access financial advice – whether that be in person or online.”

Keep up to date with the new regime here.