New advice safeguards will protect consumers

  • Hon Kris Faafoi
Commerce and Consumer Affairs

Consumers will have more peace of mind dealing with financial advisers under a new licensing and rules regime announced today by Minister of Commerce and Consumer Affairs Hon Kris Faafoi.

“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.

 “There is already a body of work in progress to improve regulation of New Zealand’s financial systems, including measures to ensure financial advice provided is in the best interest of consumers, reforming contract law on insurance and revising credit laws to stop predatory and other lending not in the best interests of consumers.

“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.”

The Financial Markets Authority will also be responsible for regulation of the new financial advice regime coming into force in June 2020. This follows the passing of the Financial Services Legislation Amendment Act into law, and the approval of the code of professional conduct for financial advice services.

“We want New Zealanders to be able to access good quality financial advice, because good financial advice can make a huge difference in people’s financial position and the quality of life they are able to enjoy.

“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.”

The Government has agreed that the new regime will come into force in June 2020, with the exact date to be determined by Order in Council in the coming months.

“Businesses and individuals providing financial advice now have a year to prepare to meet the requirements that will apply in the new regime,” says Mr Faafoi.

“We have several thousand financial advisers operating in New Zealand. Not only will this new regime level the playing field so they are all subject to the same rules and oversight it will increase the standard of financial advice across the board.”

Under the new regime anyone who gives financial advice to retail clients will be required to operate under a licence granted by the Financial Markets Authority (FMA). Application fees for these licences will range from $612 to $922 for a full licence, and $405 for a transitional licence.

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.