CoFI is working its way through Parliament and there has been concern that it creates conduct requirements for financial advisers, on top of those introduced by FSLAA and the new code of conduct for financial advisers.

In a webinar with Financial Advice NZ, Faafoi acknowledged that concern and said he did not want the conduct regime to add another layer of complexity of regulation on top for advisers.

The bill in its current form also allows regulations to dictate remuneration structures, which some industry participants have expressed concern about.

Faafoi said Government recognised that commissions were a legitimate way of paying advisers for their “important work” because consumers were generally unwilling to pay for financial advice. He said the Government was aware that commission structures were the way the sector had operated for decades.

“It is not the Government’s intention to ban all commission.”

But he said the Government wanted to prohibit target-based incentives that created a strong conflict of interest.

Reserve Bank and Financial Markets Authority work had shown some structures in place that were not in the best interest of consumers and were detrimental to consumer faith in the industry long-term, he said.

Faafoi said he was committed to seeing the conduct bill progress but was conscious of the need to provide enough lead-in time.

Government needed to make minor changes to the regulation requirements under FSLAA, which will dictate things such as how advisers describe their remuneration to clients. Faafoi said amendments were needed to reflect the revised timing of the regime but the regulations should be finalised soon.

Faafoi thanked advisers for their work through Covid-19, supporting clients who were struggling financially. “I’m aware you have faced and will continue to face high levels of inquiry and concern from clients abut investments and financial wellbeing more generally.”

He said he was aware of the increased demands facing clients, and that advisers might be worried about the health of their own businesses. “I’m conscious of the increased demands you’re facing from clients and the impact this will be having on your welfare and that of your staff as well. I encourage you to look after yourselves and your people.”