The Berry Report

Financial commentary from Tracey Berry.

Tracey Berry is BNZ's Head of Wealth and Private Bank. The views expressed here are her own, and don't necessarily represent those of BNZ. 

A New Era for Financial Services

July 1st 2011 marks the dawn of a new era in financial services with the full implementation of the Financial Advisers Act.  The Act, accompanied by regulations and a Code of Professional  Conduct, has been many years in the making and has, and will alter the nature of how and by whom, financial advice is provided in this country.

With oversight of the Act and wide ranging powers, the newly formed Financial Markets Authority’s (FMA) main objective is to promote and facilitate the development of fair, efficient and transparent financial markets.  The establishment of the FMA results in a twin peaks regulatory structure, sitting comfortably alongside the Reserve Bank.

So what does this all mean?

The formal explanation of the purpose of the Financial Advisers Act ‘is to promote the sound and efficient delivery of financial advice, and to encourage public confidence in the professionalism and integrity of financial advisers’. 

Essentially the Act divides the scope of how those that provide advice are impacted by categorisation: which products and solutions they provide advice on, and then the nature of this advice in relation to your personal circumstances with different tiers of disclosure and conduct obligations according to the complexity and risk posed by the advice given.  For those providing advice on more complex products (known as ‘Category 1’ products – shares, bonds, managed funds and KiwiSaver for exasmple) the obligations are much higher, than on those providing advice on mortgages or bank accounts.

Many of these advisers (some exceptions apply for individuals working for a organisation that is a QFE) are now required to hold minimum qualifications, have demonstrated competency, as well as be registered and authorised by the FMA – which if successful, provides them the designation of ‘Authorised Financial Adviser’ (AFA).  

If you fall within this service and solution realm, the requirement to hold this designation and meet the ongoing requirements of the Code of Professional Conduct apply – regardless of where you work – so includes banks, fund managers, KiwiSaver providers, independent financial advisers and some insurance companies as well as others.  Bank of New Zealand will have circa 60 AFAs, predominately within our Private Bank team.

So what can you expect as a minimum from an AFA before you make a decision to invest?

• Upfront disclosure to ensure that you can make informed decisions about whether to use a financial adviser and whether to follow a financial adviser's advice, including any conflicts of interest that may arise in providing you advice (this includes how they are remunerated);
• Explanations on their scope of service (what they can and can’t do for you)
• Explanations and detail on fees and charges
• Information and access to a free dispute resolution scheme (we use the Banking Ombudsman)

The new regulatory environment has been long awaited by the industry and investors, providing the structured platform for strong regulatory oversight and more informed investor choice.  We look forward to enabling the Act to meet its purpose and in playing our part to restore investor confidence.

For more information on the Financial Advisers Act 2008, including the current list of all Authorised Financial Advisers, Qualifying Financial Entities, or the Financial Markets Authority in general please go to www.fma.govt.nz

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