Regulation will restore confidence in financial advice
The Government is not looking to ruin the financial advice sector by over-regulation but make it more accessible and trustworthy for consumers in the long run.
Wednesday, November 17th 2021, 6:28AM 
19 Comments
by Matthew Martin
David Clark (right) opened the Financial Advice NZ conference.
Dr David Clark, Minister of Commerce and Consumer Affairs (among others), opened the Financial Advice New Zealand annual conference yesterday providing delegates with his vision for the financial services sector and an update on how the new regime is operating.
Clark says he is well aware that some in the industry are struggling to come to terms with the changes implemented over the last few years and have concerns about impending legislation such as the Financial Markets (Conduct of Institutions) Amendment Bill (CoFI) and consumer data rights but is confident the Government has got the balance right.
"The intention is not to interfere with the provision of financial advice but to ensure providers are working in the best interest of consumers," he says.
Clark wants the sector to work together for the financial well-being of all New Zealanders and says financial advisers are critical to the process.
"Your mahi (work) is needed now more than ever...you play a critical role in communicating about money, financial literacy and building on common goals.
"It's critical the financial sector comes together to protect the most vulnerable."
Clark says there are many people in New Zealand struggling to make ends meet and this could get worse with rising inflation.
He points to recent statistics regarding the rising number of people applying for hardship withdrawals from KiwiSaver accounts who are essentially using their retirement savings to solve short-term financial distress.
In response to a question from a delegate about the Credit Contracts and Consumer Finance Act (CCCFA) changes and how the major banks have become increasingly conservative in approving home loans, Clark says the point of the legislation is to stop people taking on debt they can't afford to service.
"We are seeing banks being more cautious....inflation is popping up so protections and good advice are important."
Clark also praised the FinTech sector saying the introduction of consumer data right legislation will help the sector "take off" but there was also "risks and apprehension" when it came to buy now-pay later schemes.
He says a discussion paper on the pros and cons of buy now-pay later will help to regulate that sector in future.
He says FinTech is a fast-growing and evolving industry empowering a huge wave of finance and investment tools, such as Sharesies and Hatch, and that New Zealand had jumped 15 positions to number 30 in the world in terms of the use of FinTech by consumers.
Clark says more time and effort will be invested into aligning the various dispute resolution schemes allowing better access to justice for consumers.
He says the new licensing regime has progressed relatively smoothly and encouraged delegates to engage with the Financial Markets Authority and get their licences in place.
"We will find the system will find its own place and rhythm over time but there will be a period of adjustment."
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Comments from our readers
They are hardly unbiased observers of what the Government has unleashed on the sector, and they wouldn't say anything other than "The Government has got it about right."
Debt to income limits of 6 or 7 is probably the final nail in the coffin for first home buyers ability to buy a house - an $80K household could borrow 480K at 6 times and 560K at 7 times. With 20% deposit required, that limits purchase price $600K at 6 times and $700K. Where will they find that in most of metropolitan NZ.
And that's assuming their bank doesn't think they spend too much money on coffees, Friday night drinks or Netflix so they can jump the CCCFA hurdles.
I hope MPs realise most Kiwis don't earn as much as they do!
And if we know that, by what measure is it necessary for the cccfa and DTIs?
Or are the lower income earners and the first time buyers just the sacrificial lambs in the pursuit of reversing the Reserve Bank's mistaken over-stimulus?
I also agree with JeffQV's observations that the NZ lending system favours 'low risk candidates' at the expense of others who are hoping to borrow. In fact - Tony Alexander noted recently that the NZ lending system has around a 1% rate rise elasticity before there's pressure.
He studied theology - quite fitting as with this caliber of minister and this level of regulation it seems that only God can save us now.
Our industry and the New Zealand consumer has been saddled with a lame duck MP who probably shouldn't be in Cabinet now based on how he handled his last portfolio. If Hon David Clark actually thinks that regulation of the financial services industry in conjunction with the draconian CCCFA changes is going to benefit the New Zealand consumer he is woefully out of touch with reality. We have had two senior bankers state publicly that borrowers are going to be worse off when it comes to them securing finance in the future.
Far from regulation restoring confidence in the financial advice sector it will instead just cement high paying jobs for bureaucrats at Government departments like the Financial Markets Authority & MBIE and provide an ongoing revenue stream now for education providers like Strategi. These organisations have an agenda in seeing more and more compliance added each year now to advisers and our businesses.
Regulation is supposed to make things better for the consumer not worse. How soon to the next general election?
This is where so called 'regulation’ actually has a reverse effect on the consumer putting them in a worse off position and taking risks they don’t understand.
The current over regulation is “affecting the provision of financial advice" Mr Clark, when you make it hard for customers to seek it, its failed.
I agree with 'Two cents', customers flock back to banks where its “easier” because there is no advice given about anything, until they send you off to a mortgagee sale.
It's a bit like a pandemic with not enough ICU beds.
2. Strategi has no 'agenda' to see more regulation in the market. Like most responsible participants, Strategi promotes and supports a properly regulated and strong financial services industry.
3. If the strength and depth of feeling is so intense as suggested, get mobilised and support FANZ in their efforts to have CoFI eliminate duplication and overlap of legislation.
Regulation is the gift that keeps on giving for education providers like Strategi. If the Minister (laughter) consulted your organisation and asked whether you believed that advisers should be required now to complete more educational requirements to be able to give advice to our customers can you honestly say that Strategi would not be in favour of this? Of course you would so you have a financial agenda. The FMA and MBIE likewise see regulation as a “job generator” for more back office bureaucrats to be employed at the tax payer's expense. Money and jobs. That's what regulation has become about now. The consumer is not the key focus.
Unfortunately FANZ has no teeth to affect any positive change for advisers. Nothing earth shattering about that revelation. This Government in particular will do whatever it wants to our industry as they just think they know better than us. We have seen this time and time again across many sectors of NZ society i.e. three waters.
i also question the authority, why aren't qualifications from ANZIIF and CII not recognised in nz? both have been providing professional qualifications for over 100 years, recognised worldwide, and most CEOs and top management held their qualifications. insurance principles and practices haven't changed since, have they? they couldn't give me an answer.
yup, advisers are "the gravy train".
My view is it was largely driven by officials in MBIE (and perhaps to a much lesser extent FMA) and whomsoever they were listening to but certainly not the politicians.
Its not entirely clear who the MBIE officials might have paid most attention to, but I have my suspicions.
@murray: i'm with you on the suspicion bit. it's highly suspicious for me.
Just been speaking to one of my learned colleagues about him completing his Level 5 papers in advance of applying for a FAP license next year. He tells me he now finds himself getting bombarded regularly by Strategi staff telling him he should complete additional courses at $1,500+ each. If that's not called having a financial agenda I don't know what is.
then if they want to hold portfolios, take the respective strand papers like health administration, education, defense, town planning, criminology, supply chain, etc. PLUS some years of work experience at management level.
this way, we'll have better qualified politicians.
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