It was one of the biggest changes revealed in the draft Financial Services Legislation Amendment Bill, which was released on Friday.

The bill replaces the Financial Advisers Act, by amending the Financial Markets Conduct Act and the Financial Service Providers Act.

As widely signalled, it requires all advisers to operate under a code of conduct, with uniform disclosure requirements. All advisers, even those dealing with wholesale clients, have a requirement to put their clients first. It introduces entity licensing and wider conduct requirements. 

RFAs, AFAs and QFE advisers are no longer, replaced by financial advisers and  financial advice representatives, working for financial advice providers.

The Ministry of Business, Innovation and Employment had earlier favoured "agents" rather than "representatives" but said it had changed that position because of the meaning of the word "agent" within the industry. 

IFA chief executive Fred Dodds said the move to representative was a step too far. “Representative has certainly been a suggestion but to have it linked to advice makes a very poor line in the sand,” he said. “It certainly provides no solution or clarity on the contentious sales/advice debate.”

His counterpart at the PAA, Rod Severn, agreed.

"While the earlier proposed term ‘agent’ may have had its own set of confusion-challenges, the newly proposed designations - FA and FAR - take that confusion to a new level.

"The line between 'sales' and 'advice' has not been drawn. The new designations FA ‘financial adviser' and FAR ‘financial advice representative' do not communicate to the public the essential difference between sole-provider advisers and those with access to multiple providers. It also does very little to differentiate between someone providing advice for which they take individual responsibility, and those who don’t,"  he said.

"The exposure draft states that financial advice representatives will not be individually accountable for compliance with conduct and disclosure. In our view, to increase public trust and confidence and to place the interests of the public first, all advisers must be individually accountable for their advice.

"We don’t support a structure in which some 25,000 FARs - ex-QFEs -  can provide ‘advice’ on one provider’s product and without individual accountability. If FARs are to provide ‘advice’, they should also be individually accountable for the advice they provide.   The public deserves a better outcome than this. Crucially, this kind of structure would impede the development of a professional advice sector in New Zealand; accountability is fundamental to providing client-first advice."

He said it was not clear what incentive there would be for someone to register as an adviser, with compliance cost, obligation and accountability, when they could be a representative with no accountability for compliance, under the protection of a licenced financial service provider.

Bradley Kidd a partner at Chapman Tripp said there was still some complexity around those designations.

“That’s where advisers have to pay attention, for me the individual what am I going to be? It will depend a bit on what their employer does and what they want to do. Some employers may say they don’t want advisers, they want representatives, others might not. We’re still digesting all that and it’s one area that will get a bit of attention.”

The bill merges financial adviser legislation with the Financial Markets Conduct Act, which has also taken some industry commentators by surprise. Many had expected an updated Financial Advisers Act.

But David Ireland, chair of the code committee and partner at Kensington Swan, said it made sense because the licensing mechanisms were already there, and it would keep everything in one place.

He said, had the legislation been written 10 years ago with a clean slate, this would have been the obvious way to structure it.

As it was, it could take some time for some to get their heads around it, he said. The FMCA was already big and complex, he said, and this added another level.

Instead of dealing with one short act, advisers would have to find their place within the much bigger FMCA.

But he said it instantly gave the Financial Markets Authority access to a much wider range of FMCA tools to deal with advisers.

Ireland said it was also notable that the new legislation gave the responsibility for the code committee and code of conduct to the Commerce Minister. The FMA will no longer have a role in approving code members or the code itself, although it still has to fund the committee.