New laws governing the New Zealand financial advice sector take effect today, nearly five years after the reforms were first mooted, which started with a review of the Financial Advisers Act 2008.

Under the new regime, advisers servicing retail clients must hold or operate under a Financial Advice Provider licence. They are also to comply with a new Code of Conduct that starts today. The code sets out standards of competence and conduct that advisers are required to adhere to.

Financial Markets Authority (FMA), the country’s regulator in charge of overseeing the advice sector, says the changes are an “important milestone” for consumers as they seek access to good professional advisers.

“We know that this has been a big change for the financial advice industry which has had to adapt, while also dealing with the impact of COVID-19,” FMA Director of Market Engagement John Botica said today.

“It was encouraging to see so many advisers supporting their clients during the pandemic, while also adapting their business models in line with the new licensing requirements.

“This new regulatory regime is designed to help improve people’s financial resilience by making it easier to access high-quality financial advice that will better prepare them for the future.”

New Zealand Commerce and Consumer Affairs Minister David Clark says the new laws will ensure that clients’ interests come first and that they will be protected even if they are getting advice through online channels.

He says the reforms are part of the Government’s wider work to strengthen consumer confidence in the financial services sector. This includes changes to the broader conduct of financial institutions, which will complement the new financial advice regime.

“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,” Mr Clark said.

“The changes will 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.

“The same basic protections for consumers will apply regardless of how they choose to access financial advice – whether that be in person or online.”

Financial Advice New Zealand, the peak body representing advisers, says the new legislation will improve public confidence in the profession.

“Commerce Minister David Clark put it in a nutshell when he said 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’,” CEO Katrina Shanks said.

“Financial Advice NZ is proud to be supporting financial advisers during this time and is proud of the commitment they have shown towards the new regime.

“The focus of advisers will continue to be on delivering quality financial advice to their clients and making a difference in their lives.”

Click here for more on the new advice regime.