Change coming for KiwiSaver advice

Registered financial advisers providing KiwiSaver advice will need to complete an investment qualification to continue to do so under the new advice regime.

Thursday, January 9th 2020, 6:00AM

Peter Cave

At the moment, a number of advisers are able to offer assistance with KiwiSaver as RFAs by offering only class advice.

But under the new rules, class advice will no longer be an option and all advisers will need appropriate qualifications for the services they offer.

A Financial Markets Authority spokesperson said any adviser relying on the two-year competency exemption from June 29 this year would be able to continue to give class advice until June 2022.

The competency exemption applies to any adviser operating under the current regime who obtains a transitional or full licence under the new regime.

“Any adviser not relying on the competency exemption, or giving advice after June 2022, must meet the competence knowledge and skill requirements set out in the new Code of Professional Conduct for Financial Services before providing such advice.

“For example, if the type of advice provided falls under code standard 7 (designing an investment plan) then the investment strand is required (or equivalent as per the code).

“If the type of advice provided falls under code standard 8 (providing a recommendation on a financial advice product or switching funds within a managed investment scheme) then the most relevant specialist strand is required for each financial advice product type (or equivalent as per the code). In the case of recommending KiwiSaver or switching funds within a KiwiSaver scheme, the most relevant specialist strand is the investment strand (or equivalent as per the code).”

Peter Cave, managing director of adviser group Lifetime, said it was important for RFAs offering KiwiSaver advice to attain the investment strand.

“KiwiSaver is being sold as a commodity currently, where it should be delivered as a retirement and wealth accumulation strategy, particularly given the balances that will accumulate over time. Whilst some may challenge the need to do the investment strand, consumers will ultimately demand higher levels of investment advice, not just a sales process.

“One could challenge the adviser’s level of competency if they struggle to complete the investment strand. We would have an expectation that Lifetime advisers meet this standard as a minimum.”

Financial Advice NZ chief executive Katrina Shanks said some mortgage advisers had argued for KiwiSaver to be exempt because they were dealing primarily with first-home withdrawals.

“However, with the removal of the category of class advice from the legislation and with increasing KiwiSaver balances, along with a couple of other arguments, the decision was made to include it as investment advice.”

She said those who did not obtain a level five qualification could join a financial advice provider with the procedures and systems to demonstrate competency.

“Obtaining a qualification will give advisers more choices longer term in terms of how they will provide regulated financial advice, and which FAP they will operate within.

“However, if the qualification option is not desired, then advisers can operate within a FAP which is responsible for ensuring they can demonstrate competency through procedures, systems and expertise. This will no doubt have a high level of scrutiny by the FAP over the advice which is delivered and how it is delivered.

“I am supportive of the general aim to have more advisers qualified. This helps lift the standards within the sector, one of the key goals of Financial Advice New Zealand. We believe lifting standards will lead to increased public confidence and more people seeking advice, which will ultimately help Kiwis have better financial health, wealth and wellbeing.”

Tags: Financial Services Legislation Amendment Act KiwiSaver new regime registered financial advisers