The Ministry of Business, Innovation and Employment’s Sharon Corbett and Rose Wang fronted a Financial Advice NZ webinar to discuss the new disclosure regulations, which will take effect on March 15.

The regulations have three parts: The information about a financial advice provider that needs to be on its website to ensure that consumers could choose a FAP that suits their needs, more information given when the nature and scope of advice is known, and a final tranche of disclosure when the advice is given.

As part of that, advisers are required to disclose any commissions or incentives they receive that a reasonable client might think might materially influence their advice.

If the adviser was paid a salary but their FAP received commission that would need to be disclosed if a client might think it would be a factor.

“We’re not saying commissions are always bad but they can create a conflict of interest – disclosing commissions that have the potential to materially influence advice and what advisers would do to manage that is important,” Wang said.

If there were other fees that could apply as a result of following the advice, such as management fees for an investment, the fact of their existence disclosed so that the client did not think the adviser’s fees were the extent of what would be paid.

Corbett said the focus was on moving away from a tick-box exercise where clients were given information they might not understand or have time to process, to one in which information was given in a clear and useful way at the right time to help clients make good decisions. She said disclosure too early was often forgotten or disregarded and disclosure given too late could risk leaving the client feeling locked in with an adviser.

“We hope the new regime, with consistent conduct and client care standards, will help build on your efforts to improve access to financial advice.”

If information is given at the same time as scope is determined, those two disclosure requirements could be combined into one.

“It is a brave new world in terms of not having this prescriptive thing anymore – I encourage you all to get your heads around what this all means.”

Disclosure can be given verbally but clients need to be told a written option is also available to them. The FMA is also imposing a record-keeping condition on licencees.