Insurers oppose the New Zealand Government’s proposed reforms of the financial services industry, which include making a clear distinction between sales and advice.

Three potential packages are mooted in an options paper under the review of the Financial Advisers Act 2008 and the Financial Service Providers Act 2008.

The Insurance Council of New Zealand (ICNZ) says there are “significant shortcomings” in all three.

“ICNZ is unable to express a preference for or lend support to any of the three packages,” CEO Tim Grafton says in a submission to the review.

“Each has significant shortcomings based on our submissions… there is also no majority view or consensus among our members on the packages.”

Package three aims to “clearly distinguish sales from advice”.

“To this end, anyone providing financial advice services would need to meet competency and ethical obligations unless they notified consumers that the transaction is a sale,” the options paper says.

ICNZ supports a conceptual distinction between sales and advice, but disagrees with how sales is described in the paper.

“The options paper casts sales in an extremely negative way,” Mr Grafton says. “Sales is an inaccurate term to describe the service some insurers provide to their customers.”

IAG New Zealand says cascading definitions of financial adviser within the current Financial Advisers Act are a core problem.

“If this definitional problem is resolved, many of the issues with the current regime are likely to be mitigated, and improving it becomes much easier,” it says. “To achieve the outcomes listed in the [options] paper it is essential that the Act becomes more focused. It cannot continue to regulate all financial advice.”

Allianz New Zealand disagrees with distinguishing between sales and advice.

“Put another way, from the consumer’s perspective, the product provider could be a tied agent, a pure distribution/execution-only agent or a fully fledged adviser trained and motivated to recommend tailored advice,” Allianz says.

Tower Insurance is also against moves to distinguish between sales and advice.

“This runs counter to our business model, which enables our staff as [qualifying financial entity] advisers to have meaningful discussion with customers, understand their insurance needs and ensure a suitable product is offered and sold,” Tower says.