As a long time advocate of a more regulated financial industry, I am excited to see that new regulations for financial advisers are coming.
Currently, there is a huge shortfall in client protection when dealing with some types of financial adviser. Insurance and mortgage brokers, for example, have had an easy run up until now with no requirement for formal qualifications and little regulation about how they formulate or sell their advice services.
The Financial Markets Authority has been working with the Ministry of Business, Innovation and Employment as well as numerous other industry bodies to re-regulate this industry with the focus being that clients’ interests must always come first and that advisers must be competent to provide advice.
Now, if you’re reading this as a client of an adviser, you might be asking yourself why this isn’t already the case. Well that answer is long and open to interpretation but what is important is that it is happening right now.
The Financial Services Legislation Amendment Bill passed its first reading last December and earlier this year we saw it open to public submissions. Those have now closed and we are only months away from seeing the bill passed and new regulations and requirements coming into effect over the next two years. Of particular interest are the new licensing requirements and qualifications required to operate as a financial adviser.
Fair to say, selling insurance and mortgage products wasn’t always as complex as it is today and our industry has developed in a large way from the original salespeople who used to stand on soap boxes and sell insurance polices at the town hall – but times have changed. Financial advice is increasingly complex and we must lift our standards and educate ourselves properly if we are to be trusted with clients’ hard earned money.
I facilitate the NZQA qualification on residential property lending and have been impressed with the support and participation of hundreds of mortgage advisers already jumping on board to upskill and provide better services. I sincerely hope we see the same from other sectors.
Licensing is also getting an update, with a simplified three tier system consisting of ‘financial advice providers’ at the uppermost level, ‘financial advisers’ being qualified and competent to provide advice, and ‘authorised representatives’, who will likely be the sales people you see at places such as the bank. Importantly, only financial advisers will be able to give advice and they must hold or have the support of a financial advice provider before doing so. Authorised representatives, which is where most of the industry sits now, will only be allowed to sell products and services without tailoring them to a client’s specific needs. There is certainly a place for all of these roles but we can expect the limitations and authorities of these to become far more transparent than ever before.
Overall, it’s a great time to be a financial adviser and it’s about time our clients knew exactly what we do and how we are held accountable for our actions. At the forefront, our job is to improve your financial situation – pure and simple.
The opinions and information expressed above are not a financial recommendation. Contact a financial adviser for written recommendations that are suited to your personal situation.