Financial services law change – need a refresh on what it’s all about?

Financial services law change – need a refresh on what it’s all about?

Monday 15 March marks a new era in the regulation of financial advice in New Zealand. That’s when the Financial Services Legislation Amendment Act 2019 comes into force, bringing with it changes to the laws governing financial advice to retail clients.

At Insurance Advisernet New Zealand we have had a project team working on the changes for nearly two years to prepare and support our broker network. Given the date is fast approaching, we thought we’d set out the key points for anyone still unsure about what’s involved.

Ensure you hold the right licence

From 15 March 2021, all advisers must either hold a Financial Advice Provider (FAP) licence, issued by the Financial Markets Authority, or operate under another FAP’s licence. Both the adviser and the FAP must be registered on the Financial Service Providers Register.

Who is a Financial Adviser? There are currently three main types of adviser who can give advice on different products: 

  • AFA (Authorised Financial Adviser), who can give personal advice on Investments, like Kiwisaver and managed funds and provide an investment planning service
  • RFA (Registered Financial Adviser), who can give personal advice on insurance, and mortgages, and
  • A QFE (Qualified Financial Entity) adviser, who are linked to an organisation like a bank or insurance company and can give personal advice about only the products they sell.

Under the new regime these categories are replaced by the umbrella term “Financial Adviser”. This is “an individual registered on the Financial Service Providers Register to provide a financial advice service, who is not a financial advice provider.”

Understand your duties and obligations

The legislation sets out new duties to ensure clients get timely, accurate and understandable information to help them to make decisions about financial products and financial services. There are duties to:

  • Take reasonable steps to ensure clients understand the nature and scope of advice; 
  • Where there’s a conflict of interest an adviser must give priority to their client’s interest;
  • At all times exercise care, diligence and skill;
  • Comply with the new Code of Professional Conduct;
  • Only recommend financial products that comply with the Financial Markets Conduct Act 2013;
  • Ensure that as an adviser you follow the new disclosure regulations, and that any information you make available to your clients is not false and misleading.

Know your professional code of conduct

All Financial Advisers will be held to the same standards, and will operate under a Code of Professional Conduct covering ethical behaviour, conduct and client care, and competence, knowledge and skill.

If you have any questions or need help or advice on the new legislation, do get in touch! 

General Advice Warning

The information provided is to be regarded as general advice. Whilst we may have collected risk information, your personal objectives, needs or financial situations were not taken into account when preparing this information. We recommend that you consider the suitability of this general advice, in respect of your objectives, financial situation and needs before acting on it. You should obtain and consider the relevant product disclosure statement before making any decision to purchase this financial product.

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