In it, Robert Oddy and Murray Weatherston say the financial advice regulation regime has limited access to advice, guidance to advisers has been at times incomprehensible, the FMA has too much control over the Code Committee, and that treatment of QFEs has been unfair.

They want regulation rewritten to clearly focus on consumers and make it easier for them to access advice.

They say regulation has driven many independent advisers out of the market or into the hands of QFEs and more are likely to follow. Many feel QFE advisers unfairly get an easier time from regulators.

But Murray and Weatherston say the lack of information on how to deal with clients who do not want a full investment plan is one of the industry's biggest problems.

“AFAs are willingly compliant with regulatory requirements but the confusion created by the numerous changes, and sometimes incomprehensible guidance, has caused some advisers to mitigate potential compliance risks by deselecting certain types of consumer and reducing the type of advice being offered,” their submission says.

“The FMA guidance in respect of limited advice and KiwiSaver has created such confusion amongst AFAs that some now refuse to provide advice for either… The reality is that because of the way the guidance is interpreted, almost all advisers think it is too dangerous (from a possible FMA monitoring viewpoint) to offer discrete advice and so have completely pulled away from offering it. Who loses? The consumer. Who are the regulations supposed to benefit – isn’t it the consumer?”

The confusion has allowed an industry of “questionable competence” to develop, purporting to offer compliance support to advisers, they argue.

“Given its regulatory function, it had been anticipated that FMA guidance would ameliorate such difficulties concisely, effectively, and with clarity. Regrettably this has not been the case.”

They also want the FMA to have less influence on the Code Committee, which administers advisers' code of conduct.

“We consider that the Code Committee is overly controlled by FMA and suggest that consideration is given to secretariat and legal support being provided independent of FMA. We do not think that the FMA should have any ability to make changes to the code of its own motion. The draft amended code should be proffered to MBIE who then pass it on to the Minister. FMA should have the ability to submit on code changes just like everyone else.”

They suggest a system of financial advisers and product information specialists, instead of the current QFE, RFA and AFA designations. Product information specialists would be required to make it clear they were salespeople not giving full advice.

SiFA says it is time for the Government to consider whether it wants an independent financial advice industry to exist in New Zealand.

If it does, changes will have to be made to ease the regulatory costs, confusion and uncertainty faced by AFAs. “We have an opportunity to make regulation simple for consumers and AFAs alike – and we need to grasp it with both hands," Oddy and Weatherston say.