The paper, addressed to the Cabinet Economic Development Committee from Commerce Minister Kris Faafoi and agreed by the Government, notes that disclosure should be useful to clients and flexible enough to work in a range of advice scenarios.

It says advisers should disclose the licence they operate under, the conduct and client care duties they are subject to, the types of advice they can provide, any commissions, incentives or conflicts of interest that could be perceived to impact the advice, any fees or costs associated with the advice, recent enforcement action against the adviser, and the complaints handling process.

"Rather than including all of this information in a single template given up-front to the client, which is the current approach and is ineffective, I propose that different pieces of information be given as it becomes relevant to the client at certain points in the advice process. 

"Recognising the range of different types of financial advice that will be covered by the regime, I also propose that the regulations provide some flexibility in terms of precisely how this disclosure is provided. This will ensure that clients are able to receive effective disclosure, regardless of how they choose to access financial advice."

The paper also said that while the Government has signalled it will remove incentives in insurance that drive poor behaviour, more disclosure of commission was needed.

"I believe it is still important that consumers get information about the commissions or other incentives that have the potential to influence the advice as it will help consumers decide whether to seek or follow advice from a particular person.

"I propose that anyone who gives regulated financial advice to retail clients disclose the incentives they may receive as a result of their relationship with the consumer. This disclosure will be limited to commissions and incentives that a client might perceive as having potential to materially influence the financial advice they receive. This will ensure that the information disclosed to consumers is not overly complex."

Faafoi said it would give consumers more confidence in financial advice.

The new disclosure requirements will be set in regulations under the Financial Services Legislation Amendment Bill, which is currently before Parliament.

“The types of information that financial advisers will be required to disclose include details about the services offered, any commissions received or other potential conflicts of interest, and any enforcement or disciplinary action taken against them," Faafoi said.

“These requirements will significantly improve the level of transparency in the financial advice sector."

The regulations will be consulted on around May, at the same time as other measures to improve the conduct of financial institutions including work to reduce harm from certain types of incentives. The Cabinet paper on disclosure requirements is available here.

A Supplementary Order Paper to FSLAB was also tabled on Tuesday, to allow technical changes to the bill including restrictions to be imposed to limit instances of individual financial advisers working for multiple financial advice firms.

“I have heard concerns that these sorts of arrangements can cause consumer harm and confusion because consumers are not sure who the adviser is working for. This can make it difficult to know who is liable if something went wrong and make it harder for a consumer to get redress," Faafoi said.

The SOP allows licence conditions or regulations to specify circumstances in which an individual financial adviser cannot give advice on behalf of multiple providers.