Download a copy of the consultation paper here.

Chairman David Ireland said it was timely to review the code, which has been in place since 2010.

One of the key changes the committee is proposing is added emphasis on code standard one – the requirement to put a client’s interests first – as the overarching code standard.

“We have had feedback from some quarters suggesting that if they comply with what is set out in the other standards, that overrides standard one… We had always intended that code standard one should be seen as paramount. But nothing other than its placement gave it that emphasis.”

He said if the committee was to move towards being less prescriptive with the other standards, the need to put clients’ interests first would become even more important. “That’s the backstop, the ultimate.”

The committee is also reviewing code standard five, which relates to conflicts of interest.

Ireland said the committee did not feel it had the jurisdiction to directly attack conflicted remuneration but it was important to have a clear conflict of interest standard. “We need to clarify what we mean when we say ‘managing conflict of interest’.”

That would partly mean emphasising client first, he said, and clarify that it meant more than just disclosing remuneration. “Soft commission is still a conflict of interest. If I sell an insurance product and get an all-expenses-paid trip to the Gold Coast, I’m getting something out of it and I need to explain that to clients.”

He said there were a lot of situations where there were other influences on an adviser’s advice, not just through direct remuneration or soft remuneration but their interest in related parties that stood to benefit.

It has already been reported that the committee was mulling the possibility of a “KiwiSaver only” adviser, and the consultation documents provide more information about that.

Advisers would be able to qualify to advise only on KiwiSaver, not other investment products. But they would be regulated as if they were a full AFA. Ireland said: “We see KiwiSaver as a relatively simple product as a concept. There’s a more specific skillset for people to advise on that.”

Advisers would only have to pass sets a, b, and c – not d, which deals with numeric formulae and other information needed to deal in bonds, shares ad other investment products.

Ireland said it was unclear how many advisers would want to take up the offer, because of the extra compliance. “Hopefully that won’t be a put-off for them because we like to think they operate in that way any way.”

There are also changes proposed to support a new qualifications framework that will increase minimum standards of competence, knowledge and skill for AFAs, and introduce more flexibility in continuing professional training as well as clarifying requirements for structured training.

Ireland said the Committee is particularly interested in feedback on how well the current suitability and basis for advice code standards are working.

“There has been a lot of industry feedback about how these may be limiting access to professional financial advice. This is not a desired outcome, so it’s very important we get some detailed feedback on these points.”

The committee plans to hold public meetings on the changes and submissions close on September 6.