KAN chair calls for financial advisers to be exempt from CoFi
David Seymour's Ministry for Regulation should exempt Class 1 and Class 2 financial advice providers (FAPs) from complying with the Financial Markets (Conduct of Institutions) Amendment Act 2022 (CoFi), according to consultant David Whyte.
Wednesday, October 16th 2024, 6:06AM
by Jenny Ruth
Class 1 FAPs are sole advisers while Class 2 providers are groups of advisers.
Whyte, who chairs the Kiwi Advice Network (KAN) and owns the DCW Management consultancy, says that only the financial product advisers should have to comply with CoFi.
Advisers already have “a clear fiduciary duty to represent their clients' interests” under other financial services legislation, such as the Financial Services Legislation Amendment Act, as well as their professional code of conduct, “which clearly states they have to put the client's interests above their own,” Whyte told GoodReturns.
Cofi is simply duplicating regulations advisers are already complying with, he says.
Writing in his The Laird Online newsletter, Whyte says the true measure of the success of Seymour's ministry will be “its ability to deliver tangible benefits to the business community, particularly the financial services industry, which has faced intense regulatory scrutiny for over a decade.”
He says it's “crucial to ensure that regulations are effective without being overly burdensome.”
Financial product providers, designated by the Financial Markets Authority (FMA) as Class 3 FAPs, should be the only ones required to comply with Cofi.
“The Ministry for Regulation has a prime opportunity to demonstrate its commitment to reducing regulatory burden by addressing this issue,” The Laird Online says.
“Failure to do so would render it another layer of bureaucracy, undermining its intended purpose.”
Whyte envisages a nightmare scenario in which each individual product provider demands proof from advisers that they're complying with CoFi.
That could mean advisers having to provide such proof to 40 or 50 product providers, he says.
Alternatively, if the legislation remains as it is currently, Whyte would like the FMA to enable advisers to produce a single such document.
But it should actually be the other way around: advisers should be asking product providers to show that they're compliant, he says.
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