Changes to the way financial advisers are required to operate take effect from today.
Under the Financial Services Amendment Act all financial advisers must be licensed and comply with a code of conduct. Photo: 123rf
The Financial Services Amendment Act (FSLAA) was passed into law nearly two years ago but the pandemic delayed the implementation of the new licensing and regulatory regime.
Under the new rules all financial advisers must be licensed and comply with a code of conduct which sets standards of competence and conduct. The rules will apply regardless of whether advice is given in person or online.
Commerce Minister David Clark said consumers could have greater confidence to get financial advice, and greater trust in the quality of the advice.
"The changes will increase transparency by requiring financial advisers to disclose any conflicts of interest, commissions they are paid, and limits on the companies or products they advise on."
The Financial Services Council, which covers financial advisers, said most of its members were prepared to comply or had already implemented the necessary changes.
"However, there is no denying how testing this has been, with over 70 percent saying they find the current regulatory environment to be either reasonably challenging, or the most challenging environment they have ever worked in," Council chief executive Richard Klipin.
He said a survey earlier this year showed nearly two-thirds of advisors had increased stress levels during the transition process.
MinterEllisonRuddWatts law partner Jeremy Muir said advisers should have already applied for and obtained a transitional licence, which had to be upgraded to a full licence within two years.
"The transitional licence was really a reasonably light-touch application process ... more about (the FMA) recording who was out there and then giving them permission, effectively, to carry on with the types of advice that they've been giving to date," Muir said.
"You would expect however that as the full licensing regime kicks in, that the FMA will be more focused on taking a qualitative review of advisors to ensure that they are meeting the new standards.
"Inevitably with any change, there are bound to be some people out there who haven't kept up or who think it doesn't apply to them, or think that they're compliant now but aren't quite there yet."