A passport to new advice world - Regulation and legislation
The new regulatory regime coming into play in 2021 is vastly different to the advice landscape financial advisers have known to date.
The world of Authorised Financial Advisers (AFA), Qualifying Financial Entities (QFE), QFE advisers and different categories of financial products is being ushered out. In its place come a slew of new acronyms - Financial Advisers (FAs), Nominated Representatives (NRs) and Financial Advice Providers (FAPs), along with higher industry standards and greater levels of professionalism.
The structure of the regime is entirely reformed. The Financial Advisers Act 2008 will fall away, replaced by the Financial Markets Conduct Act 2013, bringing with it more severe penalties for advice missteps. Financial advisers and FAPS will also become subject to the full force of the Financial Markets Authority’s regulatory powers.
A licensing-based regime will take over, in which all financial advisers and nominated representatives must operate under a FAP, with FAPs responsible for the conduct of all those who come under its licensing umbrella.
What will emerge from this sea-change will be a more level playing field across the advice industry. The standards required from all advisers will rise to become more akin with an AFA under the old regime. There will no longer be any specific ‘class’ of advice and no ‘category 1’ or ‘category 2’ financial products. All advice will be regulated financial advice (like personalised advice today) or information only. Only one class of financial product will exist.
This new world brings with it a Code of Professional Conduct for Financial Advice Services, something that will apply to FAPs as well as to financial advisers and nominated representatives. It sets out the conduct obligations and competence, knowledge and skill requirements that FAPs will need to ensure their financial advisers and nominated representatives are meeting.
There will also be an obligation to provide advice that is suitable for the needs of the client and reasonable steps will need to be taken to make sure the client understands the nature, and scope, of the advice being given.
Meanwhile, the disclosure regime has received its own radical overhaul. Far more will need to be disclosed than previously, in potentially as many as four different disclosure stages. Information covered will include the level of remuneration, conflicts of interest, incentives and the range of products able to be advised upon.
The new benchmark qualification for demonstrating the required level of competence, knowledge, and skill in this revamped regime will be the New Zealand Certificate in Financial Services (Level 5) V2. It involves completing the Core Strand of the qualification, as well as specialist strands relevant to the area, or areas, where the adviser provides advice.
There is no doubt the changes are extensive. Being ready to operate compliantly in this new world is essential.
Make sure you’re ready
Strategi Institute’s half-day Closing the Gaps course is designed to upskill all those who provide regulated financial advice to retail clients with the competence, knowledge, and skill required to understand and apply the legislation, regulation and code that will be applicable from 15 March 2021. Perfect for closing your knowledge gaps.
Learn more about Closing the Gaps, or enrol now.