David Whyte, former general manager of AIA in New Zealand, managing director of AIG Life in Australia and now a consultant and director in the industry, said the Financial Services Legislation Amendment Bill and accompanying new code of conduct for those offering advice would change many of the business models operating in the market.

Instead of individual authorisation of advisers and registration, everyone giving advice will have to be connected to a licensed entity. It has been indicated that this will reduce the compliance burden on some businesses.

But Whyte said it could end up being a more difficult process than some expected.

“Now is the time to start thinking about it. Having been through the process in Australia with licensing there, it comes up very quickly even though you think you’ve got time.”

He said organisations that had salaried employees might have less to do to meet their new compliance obligations.

“Entity licensing still has some major potential for bad behaviour. We can see it happening in Australia.”

He said “errant behaviour” seen in licensed firms in Australia, including mis-selling of financial products, could be repeated here if entity licensing led to a more hands-off approach from the regulator.

“But that’s what we’ve got. We have to live with it and keep a wary eye out on those that are not complying in a timely fashion with proper behaviour and best practice. It’s all very well the FMA saying it is getting impatient with product providers not meeting best practice but they have got to do something about it.”

Whyte said he was struggling to see the difference between a financial adviser and a nominated representative in practice.  “They are in no more a position of clarity than they were before the review took place. There’s the same confusing initials being bandied around and hey mean nothing to consumers.”

Nominated representatives will deal with less of their own compliance requirements.

The option to become a nominated representative operating under an entity license would appeal to those who wanted to be guided in their compliance requirements, Whyte said, or who wished to have their own licensed entity that adopted suitably compliant processes.

“You can have a financial adviser who decides to sell one product and a nominated representative who has an approved product list. How is the consumer meant to identify between the two? How does the consumer fare in the legislation?”