MBIE recently sought submissions on its suggestions for disclosure rules for financial advisers under the new regime. It suggested that all advisers should have to tell their clients upfront what they would charge in commissions – and asked whether that should be done in dollar terms.

It proposed, when the scope of advice was known, the adviser should disclose details regarding the nature and the scope of the financial advice that the individual or firm would provide, including the providers whose products they would consider, details of any particular material commissions or incentives that they, or their employer, might receive and details of any particular material conflicts of interest.

SiFA made a submission arguing that did not go far enough for big product providers.

“We believe that where an adviser for a VIO gives ‘advice’ to purchase the VIO’s own product (where VIO includes the lead firm and all its associates both upstream and downstream) then the adviser should have to disclose all the fees and charges that the VIO will be paid right up the vertical integration.”

Pathfinder chief executive John Berry said it would be important for clients to understand when they were dealing with an "independent" adviser and when they were not

"Anecdotal evidence suggests that the breadth of products an adviser considers is not well understood by consumers (ie number of providers and number of products considered). New disclosure rules need to come up with a very simple and effective way to alert consumers that they need to read more."

He said the advisers' disclosure could start with a statement such as: "I am (or I am not) an independent financial adviser."

"The disclosure detail could then explain the conflicts etc that mean they are not independent."

He said it was right that all conflicts of interest be disclosed but said the test for disclosure needed to be higher than a factor "being perceived to materially influence" advice. 

The threshold should be that if there was any doubt, the potential conflict should be disclosed, he said.

"Conflicts of interest are unavoidable in business but in financial services they need to be identified, managed and effectively disclosed to consumers. If they are not disclosed in a way consumers can understand, then the advice process is undermined."

Adviser Wayne Ross, of Newton Ross, said the MBIE proposals were not markedly different from what his firm already did.

“That said, I did have issues with some of what they were looking to change.  I think there is a focus on costs with no corresponding analysis of benefits.   There is also little to no recognition of the indirect/hidden cost of wider group revenue such as IPO underwriting, distribution and trading margins, and portfolio/security turnover, etc so again we will be left without an apples with apples comparison.”