Mortgage and insurance industry leaders have become furious over the changes after discovering that they could be barred from seeking authorisation under the Financial Advisers Act. 

Industry estimates suggest that over 3,300 advisers who have started training courses to prepare for authorisation might be turned away.

A spokesperson for Commerce Minister Simon Power said that the Minister was "working on a solution".

The Minister is currently in the United Kingdom and his office said that he would be looking at the issues and speaking to officials on his return.

He hopes to make a further statement early next week.

The Securities Commission says it is unclear on whether mortgage brokers and insurance advisers will be able to get authorised if they only advise on category two products.

Angus Dale-Jones, Securities Commission director supervision says the legislation does not state that it is not possible for those advisers dealing purely with category two products to get authorised, but there is also no authority given for the Commission to grant authorisation.

“There is no clear path for insurance advisers or mortgage brokers.”

Section 55 of the Financial Service Providers (Pre-Implementation Adjustments) Bill says if an applicant for authorisation is eligible, the Commission must authorise that person in respect of one or more of the following for a specified period:

(a) providing any financial adviser service, or specified kinds of financial adviser services, in relation to any category 1 product, specified category 1 products, or specified classes of category 1 product

(b) providing a discretionary investment management service on behalf of clients, generally or in specified cases, in relation to any category 1 product, specified category 1 products, or specified classes of category 1 product

(c) providing investment planning services generally or in specified cases.

This means unless an insurance adviser or mortgage broker has an investment component to their business, there is no clarity as to where they stand.

Professional Advisers Association (PAA) chairman Peter Leitch says this is a complete turnaround from the message it received from the Government that all categories of financial advisers needed to be authorised in the public interest.

He says the amendment legislation urgently needs to be altered to allow insurance and mortgage advisers the voluntary option of becoming authorised financial advisers (AFAs), if they so choose.

“Right now, the Securities Commission has no power to allow this.

“We are simply saying that for those who want to continue the professional path beyond registration and become AFAs, then they ought to have this choice.”

Leitch says the PAA went to considerable effort to produce ‘A Friendly Guide to Education for Financial Advisers’ specifically to help members and other participants in this industry to qualify en route to authorisation.

“At the eleventh hour, why would the Government deny those who have incurred major educational costs and devoted hours of time – and are continuing to do so – the option to become an AFA?

“The whole industry has already invested millions of dollars and thousands of hours in advance of this legislation. It cannot be in the public interest that this goes to waste.”

The New Zealand Mortgage Brokers Association (NZMBA) chairman Darren Pratley says he has told the Select Committee the Association’s happy with the revised changes but it is disappointed that the opportunity to be an AFA has been taken away after all the work, money and effort thousands of mortgage brokers and insurance advisers have put into the authorisation process.

He says the NZMBA is currently involved in discussions with the Ministry of Economic Development, as well as liaising with the Securities Commission, lawyers and other industry groups.

Life Brokers Insurance Association president Ron Flood says all advisers should complete their study even if they are not required to be authorised as their level 5 qualification will be an external confirmation of their knowledge and competence.

“It is a pity that advisers only started to study with a 'legislative gun' to their heads. It is something they should have started years ago.”