A bill intended to ensure financial institutions comply with a principle of fair conduct has “serious flaws” that needs to be addressed before it becomes law, Financial Advice New Zealand has warned.

CEO Katrina Shanks voiced her concerns in a video appearance before the country’s parliamentary Finance and Expenditure Committee, which is currently considering the Financial Markets (Conduct of Institutions) Amendment Bill after its first reading in February.

The Bill’s power to regulate sales incentives, lack of a definition of “fair”, confusion over whether financial advisers are included in fair conduct programs, the definition of intermediary, the inclusion of claims process, and the timing of the Bill’s enactment are the key areas of concerns.

She says the Bill aims to ensure consumers have access to quality financial advice and products but the intended outcomes will not be achieved unless the shortcomings are addressed.

The absence of a definition of what is “fair” has to be included in the Bill,” she said. “Its aim is to provide better outcomes for consumers, so the pivotal concept of ‘fair’ must be defined in it,” she said.

She says the claims process should be excluded from the Bill.

“As it stands, an adviser assisting or advocating on behalf of a client, particularly relating to a claim, will be included in the fair conduct program because this is outside the advice process.

“But it’s at the point of a claim that it’s fundamentally important advisers remain independent of the provider, and for that reason we recommend financial advice providers and their financial advisers be excluded when in the claims process.”