The changing face of financial advice

In March 2021, a new regulatory regime began, aimed at boosting consumer confidence in the financial advice sector and making advice easier to understand.

From Monday 15 March, all financial advisers were required to adhere to a new Code of Professional Conduct, which sets out the standards for competence and professional conduct expected of advisers, who will also need to operate under a licence from the Financial Markets Authority. The new rules include ensuring advice is communicated clearly and concisely, so clients can understand it.

“The changes increase transparency by requiring financial advisers to disclose any conflicts of interest, commissions they are paid, and limits on the companies or products they advise on, says Commerce and Consumer Affairs Minister David Clark.

The same basic protections for consumers will apply whether they access the financial advice in person or online – known as ‘robo-advice’.

Good advice matters

The new regime is part of the government’s wider work to improve consumer confidence in the financial services sector, which includes making changes to the broader conduct of financial institutions.

“We know many New Zealanders have been doing it tough financially due to Covid-19. For example, a Commission for Financial Capability survey during the nationwide Level 4 lockdown found that 66 percent of New Zealanders were financially exposed or in difficulty,” David Clark says.

“This means it’s more important than ever that Kiwis are getting financial advice that puts their interests first.”

He says financial advice plays an important role in helping New Zealanders achieve the significant milestones in their life, such as saving for a first home or planning for retirement.

“And we know that those who get financial advice achieve better financial outcomes. The new regime will give consumers greater confidence to seek advice that will help with their financial goals, providing them with greater trust in the quality of that advice,” Clark says.

A welcomed change

The changes have been welcomed by the Commission for Financial Capability (CFFC).

“The new financial advice regime raises the bar for competence and accountability of those providing financial advice,” says Retirement Commissioner Jane Wrightson, who heads the CFFC.

“We welcome measures to increase transparency and ensure advice is of high, consistent quality.”

Wrightson was particularly pleased to see the introduction of a new Code of Professional Conduct.

“These changes will help give New Zealanders faith in the financial advice sector to do right by them.”

With many New Zealanders’ KiwiSaver balances getting bigger, good advice is more important than ever to ensure the careful management required for KiwiSaver funds once they become available to the account holders at age 65. Such advice was important in helping New Zealanders attain financial wellbeing, Wrightson says.

“A robust regulatory framework that puts the consumer first, with clear expectations of advisers, will benefit everyone.”