New Zealand’s Institute of Financial Advisers (IFA) says it has no problem with the current commission payment model for financial services.

“It needs to be acknowledged advisers are not the designer of the commission models, merely the recipients,” it says in a submission to the Government’s review of the Financial Advisers Act.

“There has been no indication of loss of benefit to consumers, like in the examples in Australia.”

The IFA says commissions are now largely limited to life insurance sales, and it accepts they can distort consumer outcomes.

“In other product sets, general insurance and mortgages, commission exists in level and upfront forms. It is accepted in these business models by product providers that the consumer can move providers, as regularly as annually, without creating significant issues for the consumer.”

The IFA says if the payment model must change, it should be across product providers and advisers.

The submission also calls for legislation to be changed to help consumers identify the type of advice they are seeking.

Currently 25,000-30,000 advisers are identified as qualifying financial entities (QFEs).

The IFA believes if these advisers were registered under the Financial Markets Conduct Act, it would let them only distribute printed information and simple written advice to help complete transactions.

“By allowing verbal-class advice, consumers cannot easily identify where class advice finishes and personalised advice starts,” the submission says.

“Additionally, there is the risk that advisers may step over the regulatory line. Printed-class advice will remove both of these risks.”

The IFA says removing such advisers from the Financial Advisers Act would allow the Government to set the regulatory environment for the 6000 advisers who provide financial advice.

“Presently the [Financial Advisers] Act defines the competence required for an adviser on the product they are discussing. The definition could be moved to the competence required of an adviser on their role to assist the suitability of a particular financial product or service to satisfy a consumer’s need to achieve a longer-term goal or goals.”

The IFA says removal of QFEs from the Act would enable financial advisers “to be measured on advice competency, rather than product”.