National MP Andrew Bayly’s to-do list of four

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Three months out from the election, National Party finance spokesperson Andrew Bayly has honed his to-do list to four issues should he find himself in government.

Thursday, July 13th 2023, 6:18AM 1 Comment

by Andrea Malcolm

Regulatory overlap and fee structures are common threads between all four.

Working up from the bottom and his fourth most pressing issue is getting the right quality financial advice delivered in the right way.

He says while the introduction of the new financial advice regime and the registration process has gone remarkably well, unlike Australia, when it comes to financial advice he is concerned the regime is moving advisers to a ‘white label' requirement.

“We’re heading to a situation where it's difficult to get advice from professional advisers. Some people are wealthy and have good financial literacy; some have little financial literacy and unfortunately that’s an area  we need to do more on. But I’m scared we’re going to a situation which is overly focused on fees that go to the lowest cost provider.

“In many cases people want advice and to be able to bounce ideas off their investment adviser who should be able to offer some advice. I’m concerned we’re moving to an environment where advisers can’t do that unless something has already been totally researched.”

Bayly says the fee structure means many people now can’t access advice. “Many advisory firms now have minimum requirement investment before they will take you on or offer you any tailored service. That means many New Zealanders who are vulnerable, and perhaps you can argue are the ones that need the most amount of financial assistance, can’t get access to good financial planning advice or insurance advice because they have a relatively small amount to invest.”

Third from the bottom is a prune of AML/CFT regulations which Bayly has a working group on. “There’s too much repetition. We just need to have a verified customer identity and one source of truth and we could use blockchain for that.

Secondly he wants to stimulate New Zealand money into providing more capital for the New Zealand business scene. “We have $200 billion of relatively lazy capital invested overseas and I want to make sure people like KiwiSaver providers have the opportunity to invest in great New Zealand companies that are well established.”

Bayly uses the example of Sistema, which was bought by US fortune five hundred company Newall for $660 million in 2017. “It’s highly automated, has great operations, is doing great things and is located in New Zealand. How do we encourage KiwiSaver providers to take the opportunity to invest in a company like that other examples out there?

“With the rules around fees, we need to make sure we don’t create a disincentive for KiwiSaver providers to invest directly in this type of investment. Current fee structures mean if a provider were to invest in that type of entity through a third party like MOVAC, they have to not only disclose their fee structure for their KiwiSaver fund, but also for the MOVAC fee which makes them look uncompetitive.

“I’m not talking about putting all KiwiSaver money in it. Often in funds you’ll put 5% in alternative investments. We have $100 billion in KiwiSaver so we’re talking $5 billion. How do we encourage people to do that in a responsible way? I think the rules and regulations around that are making it quite difficult.”

Top of Bayly’s list is the financial regulatory architecture which he has described many times as a mish-mash.

“I want to be clear about the Reserve Bank's role and scope, MBIE and ComCom as far as advisory roles go, and the FMA’s enforcement powers. CoFI and CCCFA are very overlapping with jurisdiction. If I’m an adviser - who do I go to? I’m not having to go to multiple parties to check.

“Financial institutions are overseen by the Reserve Bank, CCCFA type arrangements are overseen by MBIE and the Commerce Commission and CoFI will be regulated by FMA. If we take the insurance sector - all three of those organisations have some oversight of insurance. So as an adviser how do I have clarity around who is my principal entity that I’m responsible to and how do we stop overlapping responsibilities? I don’t think it’s clear enough.

Has a small team working on how to cascade the issue. “I think the FMA should have a clear role and that’s where it should stop and start. MBIE, as a government entity, shouldn’t have any direct role. They’ve had a great deal of input, for instance with the [review] of CCCFA regulations which have proved to be a disaster.

Credit Contracts and Consumer Finance Act introduced by the government in December 2021 and has been tweaked three times, the last in April by commerce and consumer affairs minister Dr Duncan Webb.

Will take CCCFA back to December 2021 and rewrite it following the  intent of Parliament which was to create an environment very much focused on high cost lenders who were taking advantage of New Zealanders.

“We’ve ended up with banks now not lending as they should, and anecdotally 5-10% of retail lending has declined as a result of the CCCFA. People are not able to access loans because the cost of processing a loan now is so high. CCCFA was meant to be focused on second tier lenders. Then we need to review the regulations around it to make sure they’re targeted.”

Tags: CCCFA

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