OPINION: Govt seeks submissions on financial advice laws
OPINION: Commerce and Consumer Affairs Minister Paul Goldsmith explains why the review is so important.
OPINION: Commerce and Consumer Affairs Minister Paul Goldsmith explains why the review is so important.
New Zealanders have had a long-held enthusiasm for residential property. They have been warier of capital markets.
One can see why. The past three or four decades have seen several instances of disruption in the market and each time everyday investors have suffered. Something as tangible as a house, by contrast, feels safer.
Our government’s focus in capital markets has been on increasing investor confidence in the conduct of financial markets, so as to encourage more New Zealanders to consider them as a sensible form of investment and saving.
Strong capital markets are central to any productive and competitive economy – businesses need access to capital to grow. When these markets operate well, they help drive growth, create jobs and increase incomes.
It was during the global financial crisis that the government introduced the Financial Advisers Act and the Financial Service Providers (Registration and Dispute Resolution) Act. These acts aimed to help people make informed investment decisions and to promote greater participation in capital markets generally. With quality financial advice, people are better placed to make the most of the investment opportunities capital markets present.
Our financial advice laws now require a review of their effectiveness. This makes sense, as the economic, legislative and technological environments for financial advice have continued to evolve since 2011. International practice has shifted, we have taken major steps to reform our financial markets to restore confidence and trust in the system, and technology is altering the way we get our information and advice.
New Zealanders should have access to unbiased, quality financial advice that is appropriately tailored to individual needs and flexible enough to respond to the growth of new technologies and to peoples’ changing needs for financial advice at different stages in their lives.
It is time to take stock and evaluate whether these acts are working as intended. The government is now reviewing these acts and this week an issues paper was released for public consultation. We want to hear from consumers and the finance industry on how the financial advice sector is working for them.
This review is an opportunity to identify if there are ways to limit unnecessary complexity, ensure the costs of regulation do not outweigh its benefits and make sure that there are protections in place to give consumers the confidence they need to invest. This issues aper is the first step in this review process.
Some of the key questions for the review include whether consumers understand enough about how advisers are regulated and whether regulatory requirements and compliance costs have unduly restricted access to financial advice.
Commissions are an area where international practice has changed in recent years. A number of countries have moved beyond insisting on transparency over commissions to an outright ban, and clearer boundaries have been drawn between what constitutes sales versus advice.
This review is also an opportunity to consider how to maintain integrity and professionalism in New Zealand’s financial advice market. With this in mind, it is important that the government understands the industry’s perspective along with the needs and expectations of consumers who seek financial advice.
The government’s Business Growth Agenda objective is to create high-performing capital markets, to further our economic growth and contribute to the prosperity of all New Zealanders. Ensuring we have our regulatory settings right with respect to financial advice is an important aspect of this. I encourage anyone interested to submit on the issues paper that can be found at this address www.mbie.govt.nz/what-we-do/faareview.
Paul Goldsmith is the Minister of Commerce and Consumer Affairs