In a submission on the Ministry of Business, Innovation and Employment options paper on the Financial Advisers Act, the Code Committee said having a framework that allowed professional bodies to set their own rules, without an independent disciplinary process or regulatory overlay, risked undermining the regime’s objective of improving consumer confidence.

“Ill-informed or aggrieved sections of the public will view separate segments of the profession regulating their own with a high degree of scepticism, exposing the regime to the complaint of looking after its own. We believe the outcome would be negative for both financial advisers and consumers alike,” the submission said.

It said even allowing professional bodies to have input into the licensing process would be problematic.

“The Code Committee firmly supports the concept of professional industry bodies assisting members with compliance, CPD, and best practice, and acknowledges the positive work existing bodies have been doing in this space in recent years, but does not see a formal place for those bodies in the legislation to directly influence either the Code or the licensing process”

Another concern as the number of professional bodies in the sector, it said.

Other aspects of the options paper were received more favourably, though.

The committee’s submission said it supported moving the requirement to act in clients’ interests first into legislation and locking in a statutory principles-based competency obligation.

It was supportive of the idea of one code of conduct applying to all financial advisers.

“The biggest constraint on the effectiveness of the Code under the current law is its lack of universal application… The ability of the Code to meet the statutory objective of promoting public confidence in the professionalism of financial advisers has been hamstrung as a consequence.”

Committee chairman David Ireland said people needed to realise that the code that would apply under new legislation could be quite different from the current code.

“It doesn’t stand still. Under the new regime it could mean expanding or adjusting the code to cater for a wider range of financial advisers.”

Ireland was supportive of the proposal to license entities rather than individual advisers. He said it was the only way to allow for roboadvice in New Zealand.

“And the downside with individual licensing when you are removing the category one and two designations is the risk that’s going to create a huge number of individual-type authorisations. How do you manage that?"

But he said any future licensing would not necessarily be the same as the current system for AFAs and could be adjusted to suit. “It will need to be very streamlined, there’s going to be a lot of them.”

Ireland said the overall consultation process with MBIE had been well managed so far.

He said it was positive that MBIE had recognised that accessibility of advice was an issue. “The future regime need to be structured minimize the extent to which regulation is adding to that problem.”