How can it be made better?
24 Mar 2017
With just over a week left of consultation, the Ministry for Business, Innovation and Employment (MBIE) has received just 10 submissions on the law that will transform the financial advice sector. But it says it knows there are concerns about some aspects - and wants to know how it could be made better.
The Financial Services Legislation Amendment Bill repeals the Financial Advisers Act and introduces financial advice provisions into the Financial Markets Conduct Act.
An exposure draft of the bill has been out for a six-week consultation period. MBIE also wants feedback on its proposed transitional arrangements.
There have been concerns about several aspects of the bill, including the "financial advice representative" designation, and the wording of the client-first duty.
MBIE said it was seeking feedback on the terminology used. "After receiving feedback that the term ‘agent’ wasn’t workable we changed it to ‘financial advice representative’. However, we have heard some concerns that ‘financial advice representative’ may also be problematic. We would like to understand this further and welcome suggestions for alternative designations that will be more suitable and why."
It said it was important that it understood if any of the drafting or terminology could have unintended consequences. "For example, we have heard some concerns about potential unintended consequences from the current drafting of the client’s interests first duty."
It said the idea of sales and advice being separated in the law had been hotly debated. "We consulted extensively on the option of applying fewer obligations to some people who would be labelled ‘salespeople’. However, this would have meant that these people would be able to give financial advice (that is, make a recommendation or give an opinion to acquire or dispose of a financial product) without being held to the same standards as others performing the same activity.
"We were concerned this would not achieve the objectives of the review, further limit access to quality financial advice and ultimately lead to poor consumer outcomes. A key criticism of the current regime is that different people performing similar activities are held to different standards."
David Ireland, chairman of the Code Committee, which administers the code of professional conduct for financial advisers, said advisers who had concerns about what was proposed should make a submission.
"It is - despite what critics say - a genuine consultation period."
He said it was inevitable that there would be aspects or situations that the Ministry had not thought of in drafting the bill.
"It's important for those who are affected by the change to have a look at what is proposed and think about what it means for them. If something is not going to work for them, they need to give feedback. Despite what some have said, they do take that on board."
Consultation closes on March 31.
- Good Returns