New disclosure requirements give consumers information on commissions, issues
Commerce and Consumer Affairs Minister Kris Faafoi says consumers will be able to have more confidence in financial advice under new disclosure requirements agreed by Government.
The new disclosure requirements will be set in regulations under the Financial Services Legislation Amendment Bill, which is currently before Parliament and introduces a new regulatory regime for financial advice.
“The types of information that financial advisers will be required to disclose include details about the services offered, any commissions received or other potential conflicts of interest, and any enforcement or disciplinary action taken against them.
“These requirements will significantly improve the level of transparency in the financial advice sector,” Kris Faafoi says.
“There will be flexibility in how this information can be provided to consumers, to avoid consumers being burdened with lengthy disclosure statements which can be difficult to read.
“This will ensure that consumers receive only the information they need, when they need it. This means consumers won’t be overwhelmed with information they don’t need and reduces the risk of consumers forgetting or ignoring information.
“I want to make sure these requirements work in practice, so I expect officials will be consulting on the draft disclosure regulations in the next few months.”
The regulations will be consulted on around May, at the same time as other measures to improve the conduct of financial institutions including work to reduce harm from certain types of incentives. The Cabinet paper on disclosure requirements is available here.
A Supplementary Order Paper to the Financial Services legislation Amendment Bill was also tabled today, to allow technical changes to the Bill including restrictions to be imposed to limit instances of individual financial advisers working for multiple financial advice firms.
“I have heard concerns that these sorts of arrangements can cause consumer harm and confusion because consumers are not sure who the adviser is working for. This can make it difficult to know who is liable if something went wrong and make it harder for a consumer to get redress."
The SOP allows licence conditions or regulations to specify circumstances in which an individual financial adviser cannot give advice on behalf of multiple providers.