The New Zealand Government is consulting on regulation of the financial advice industry, with commissions in the firing line.

An issues paper looks at potential reform of the Financial Advisers Act and the Financial Service Providers Act.

“This review is an opportunity to identify if there are ways to limit unnecessary complexity, ensure the costs of regulation do not outweigh its benefits, guarantee conflicts of interest are effectively dealt with and make sure there are protections in place to give consumers confidence to invest,” Minister of Commerce and Consumer Affairs Paul Goldsmith said.

The paper says a number of jurisdictions worldwide have either banned or restricted the use of commissions.

“We seek feedback on whether the current disclosure requirements for commissions and conflicts of interest are adequate, and how they should be changed or improved. We also note that current requirements apply only to authorised financial advisers, and seek feedback on whether they should be applied to all financial advisers, and if so, at what level.”

The Insurance Brokers Association of New Zealand (IBANZ) will work to ensure the Government understands why general insurance brokers should not be included in any commissions ban, CEO Gary Young says.

Consultation is open until July 22, and Mr Young says IBANZ is concerned that general insurance brokers are not caught up.

“Life insurance is totally different from the general insurance market,” he told insuranceNEWS.com.au. “There are no big upfront commissions, just a standard amount annually and no incentive to churn.”

“It is not an issue is our part of insurance and the key is to ensure that the regulators understand the difference between life and general insurance.”

Insurance Council of New Zealand CEO Tim Grafton told insuranceNEWS.com.au he is not in favour of an outright ban.

“We support transparency of commissions so the insured can make an informed choice when presented with options by a broker,” he said. “There is a big difference between life and general insurance commissions but the principle should be consistent across the board.

“We are not saying there shouldn’t be commissions. We are just saying they should be transparent.”

An options paper should be released later this year, with final recommendations to the minister by July 1 next year.