In its submission on the Ministry of Business, Innovation and Employment’s Financial Advisers Act Options Paper, Law Society president Chris Moore said the paper seemed to miss a lack of perceived value as a barrier to consumers obtaining advice.

But if it wanted to meet its stated aim of improving public confidence, it needed to find a way to overcome it, he said.

“Because this barrier has not been identified, the Options Paper looks to increase professionalism through processes, such as passing exams or applying for licences,” Moore wrote.

“Professionalism comes from belonging to a profession. Good culture cannot be imposed by a regulator but must be owned and developed by that profession. The professionalism of advisers and the public’s recognition of that professionalism are critical to achieving the outcomes of the review.”

The Law Society supported the Options Paper’s view that there needed to be clearer delineation between sales and advice, he said.

Consumers would be more likely to value advice if they understood it was separate from sales and was provided by professionals.

“Much sales activity is given the cloak of ‘financial advice’,” he said.

“Distinguishing ‘financial advice’ from ‘sales’ will enhance the reputation of financial advice and the professional standing of financial advisers. Allowing a properly regulated sales channel would also enable the wider distribution of basic financial products, provided such products were suitable for the customers.”

Moore said sales should not be made by people who provided advice, unless the sale was “execution-only”.

“The financial adviser should never offer or require execution-only. A financial adviser must offer financial advice when she or she sells a product. If the customer asks for no financial advice, then an execution-only service is possible if an appropriate process is followed. No execution-only service should be provided for replacement business.”

Submissions have closed on the Options Paper and the Ministry of Business, Innovation and Employment said it would make them public over the coming weeks.