The New Zealand government is looking to remove the distinction between class and personal advice, as well as allow the provision of digital advice as it seeks to overhaul the country's regulatory regime for financial advisers.
The Financial Services Legislation Amendment Bill, which was introduced to Parliament recently, is an omnibus Bill to amend the Financial Markets Conduct Act 2013 (FMC Act) and the Financial Services Providers (Registration and Dispute Resolution) Act 2008 (FSP Act), while also repealing the Financial Advisers Act 2008 (FA Act). Under the new Bill, all financial advisers will be moved into the FMC Act regime.
Unlike the FA Act, the new Bill enables the provision of more types of advice by being technology-neutral, lifting the existing restrictions around advice needing to be provided by a human adviser.
In turn, this allows for the provision of robo-advice and works to future-proof the legislation for technological developments. It also serves to increase the New Zealand population's access to quality financial advice.
In line with this, the Bill also removes the distinction between class (general) and personal advice making it easier for advisers to tailor advice to their clients without the limitations of regulatory boundaries.
The Bill also requires individuals and digital advice platforms to put the interests of the consumer first, including by "taking all reasonable steps to ensure that the advice is not materially influenced by their own interests or those they are representing or with whom they are associated."
Further, all those providing advice to retail clients will only be able to do so where competent. They must also ensure they have taken reasonable steps to guarantee their clients are fully educated on the limitations and scope of the advice provided to them.
Global law firm DLA Piper described the move as a 'softening' as the exposure draft required a client to 'agree' on the nature and scope of services.
"The Bill requires an adviser to take reasonable steps to ensure the client understands the nature and the scope of advice being given, including any limitations. This reflects the reality that in some instances advice doesn't involve direct contact with a client risking a lack of clarity as to what would constitute 'agreement'," DLA Piper said.
In addition, all providers of financial advice will be expected to adhere to a new code of conduct that outlines minimum standards of competence, knowledge, skill, ethical behaviour, and client care. Under existing legislation such adherence has only applied to the country's 1800 authorised financial advisers, which only represent a small number of those actually providing advice in New Zealand.
The Bill requires all industry participants to be engaged by a firm with either a full or two-year transitional licence by May 2019. As it stands, the new code will be introduced in August 2018, and all industry participants will be required to be compliant with the new regulations and the FMC Act by May 2019.