The financial advice business in New Zealand (N.Z.) is facing a shakeup, as policymakers propose measures designed to ensure advisors put clients’ interests first, and to facilitate innovations such as robo-advice.
In the wake of a review of the N.Z. advice market, government policymakers announced a series of proposed changes the legislation governing the advice industry. The proposals follow a report from the country’s Ministry of Business, Innovation and Employment (MBIE), which calls for reforms that “ensure consumers can access quality advice, yet do not impose any undue compliance costs on industry or inhibit innovation.”
In particular, all forms of financial advice should be held to “a clear requirement to put the consumers’ interests first,” the report says, and be subject to a code of conduct that establishes standards for client-care and advisor competence.
Among other things, the report’s recommendations would: remove regulatory barriers to robo-advice, or forms of simple advice; require advisors, and robo-advice platforms, to be subject to active oversight, and to meet certain proficiency requirements; and introduce simplified disclosure.
The proposed changes would also restrict the use of the title “financial advisor” to advisors that take personal responsibility for their advice, and are directly accountable to regulators. Firms could also provide advice through “financial agents” that are accountable to the firm, which would answer to the regulators.
The recommendations are being taken up by government policymakers. “The changes come after a comprehensive review, which will simplify regulation, enable advisers to have sensible conversations and encourage more people to seek high quality advice tailored to their needs,” says Commerce and Consumer Affairs Minister, Paul Goldsmith, who announced the government’s plans.
“All providers of financial advice are now required to be more transparent about limitations on their advice and disclose information regarding conflicts of interest, such as commissions,” adds Goldsmith. “Focusing on consumer interest and improved transparency will improve confidence in the regulation of the financial advice industry.”
The proposed new regime will be codified in a bill that is expected to be introduced to the N.Z. Parliament later this year.
The country’s Financial Markets Authority welcomed the proposed changes as “a positive step in improving access to quality financial advice”.
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