Embracing change - how regulation will improve financial advice

Regulation and compliance are not the big bad wolves of the financial advice industry - they will change the way Kiwis give and receive advice for the better.

Tuesday, October 26th 2021, 6:49AM

by Matthew Martin

The consensus of some of the leading minds in the New Zealand financial advice world was one of positivity and excitement for a future they say will provide even more opportunity, innovation and professionalism for an industry coming to terms with a raft of new regulations.

Speaking at the Financial Services Council's Regenerations Reimagined online conference on Friday were Strategi Group executive director David Greenslade, EnableMe managing director Hannah McQueen, Consilium head of adviser services Ben Brinkerhoff (from the USA), Financial Advice New Zealand chief executive Katrina Shanks, and Partners Life head of industry engagement Mark Banicevich who facilitated the discussion.

Their message to advisers was clear - compliance and regulation are not as costly, prohibitive or time-consuming as first thought and will lead to a more professional, innovative and successful sector in the long term.

Greenslade began the session by saying the expected exodus of advisers from the industry has not happened and probably won't and while their average age is relatively old there are many younger newly qualified advisers moving into the profession who can see a pathway forward.

"Bad information, especially relating to how hard it is to get a new licence and the costs of compliance are doing the rounds...but the actual cost of doing business is pretty minimal...and if you have a viable business, paying around $5000 a year is not prohibitive."

McQueen says it's become a lot harder for people to be financially successful compared to previous generations and while hard on the people it affects, it will mean quality financial advice is even more important.

"Financial advisers need to change their mindsets and need to be agnostic about giving advice...the impact of not having a financial plan means a lot more than it did a long time ago so there's a huge opportunity for the agnostic financial adviser."

She believes performance-based commissions are not the way to go and financial advisers should be paid salaries instead so they are "...not just finding a product then trying to shoehorn a customer into it...it needs to be unbiased advice."

Shanks says the New Zealand experience of regulation change is not the same as in Australia where their industry suffered badly from reputational damage after the Royal Commission into financial practices was released.

She says Kiwis already have trust and confidence in the financial sector and this will get even better under the new regulations.

"They lost a lot of experienced advisers leading to a huge knowledge gap due to fewer people coming on board - it's a pressure situation.

"We have a vibrant profession and regulation and licencing will lift standards in New Zealand...there are not the huge licencing costs here."

She says for the first time companies will need to think about staff retention and career pathways and that it's already hard for firms to find new advisers in a highly competitive market.

Brinkerhoff says the industry in New Zealand will see some consolidation of businesses and advisers due to the new regulations and this will lead to some tension - but that's a good thing.

"This means the person who is taking the risk asks their advisers to only give advice within a narrow range - and this is the tension we want - so some will leave the large company and go out to give excellent advice the way they want to give advice."

He says New Zealand is a long way behind the US in terms of adopting financial technology and once more is in place it will encourage younger more tech-savvy people to join the industry who feel more comfortable with new technology platforms.

Greenslade went on to say that New Zealand runs a principles-based regulatory regime with far more enlightened regulators than in Australia and that the new regulations will encourage innovation.

"If you are purely focussed on selling, you'll get left behind...but if you concentrate on offering advice, you will be viable in the future.

"Innovation is the future of advice where there will be better quality advice given at a faster pace and advisers will be able to make more money and serve more clients."

Tags: David Greenslade FAP Financial advice financial advisers FSC Katrina Shanks