Changes to licensing of financial advisors...

The regulation of financial advice providers is tightening up and over the next few months all providers of financial advice will be licenced through the Financial Markets Authority.

New conduct and competence requirements will be introduced by legislation and a code of conduct.   These will provide priority towards the client’s interests and the disclosure of information by financial advisers to their clients.  This will include the clients understanding the limits on the nature or scope of any advice provided.  The new code of conduct will cover competence, knowledge and skill, ethical behaviour and client care.

All financial advisers will be subject to the Financial Adviser’s Disciplinary Committee jurisdiction. 

New legislation is expected in mid-2018 with a new code of conduct in August 2018.  A transitional licensing scheme will operate from late 2018, which will enable existing financial advice providers to transition to the new arrangements. 

It is expected that by May 2019 the new regime and code of conduct will be in full effect.  Once a financial adviser has a transitional licence they will have two years to shift from that transitional licence to a full licence.

There will be a halfway house for people working towards any new competency requirements.  They will be able to continue to operate, pending obtaining the new qualifications, but will be restricted to advice that they could give before the new scheme came into effect.

The new regime is designed to give clients confidence that financial advisers, they are dealing with, act in a competent and ethical way and put the client’s interests first.  This will include disclosure of how financial advisers are paid, for example, commissions from insurance companies.

Alan Knowsley