Commerce Minister Simon Power has approved re-categorising certain financial products as category two "to better reflect the economic substance of the product."

Under the original regulations products involving an investment element were category one products and only able to be sold by Authorised Financial Advisers (AFAs).

A paper, from Cabinet's Economic Growth and Infrastructure Committee, says that while such products "technically fall within category one" they share significant traits with category two products.

"These products are considered lower risk. . . their inclusion in category one products may reduce consumer access to these products, as they will need to receive advice from an authorised rather than registered financial adviser."

The paper also argues category one inclusion increases compliance costs for advisers by requiring some who would not otherwise seek AFA status to do so.

"I therefore propose that the initial re-categorisation of this product be for a period of five years only, and its continuation be made subject to a review by the Ministry of Economic Development in conjunction with the FMA," Power said.

He added that while supporting the intent of the original regulation, "I recognise that the financial adviser regime is in its preliminary stages and that aspects of the regime remain unproven."

AIA New Zealand has said its Cash Back Life and Permanent Term products are to be reclassified, a change CEO Wayne Besant welcomed as "great news for us and reassuring for our advisers."

However, for Wealth Building Strategies managing director Michael Shaw, the re-categorisation is less welcome.

"I was never aware that within the financial advisers legislation that the Government could turn around and do this," he said.

He said the change "is a travesty and a kick in the guts for all those advisers who worked diligently to achieve AFA status."

Another issue for Shaw is whether in the wake of the changes, providers may lobby Government to allow other products to be sold by RFAs, a cheaper distribution channel.

"I think this is the tip of the iceberg. We have to question the wisdom of those in Cabinet who have now opened the floodgates to a plethora of applications from life companies to water down the provisions of the FAA 2008 and throw the way clear for RFAs to be allowed to operate in the AFA space."

He said the logic used to make this decision could in turn clear the way for certain KiwiSaver products to be re-categorised.

"What was the point spending all this time and money becoming an AFA if all these changes are going to occur and products going to be swapped from one to another?"