'Client's best interests' doesn't have to mean cheapest

There has been debate over recent weeks about how advisers who are aligned to a provider can meet the requirements outlined in the Ministry of Business, Innovation and Employment’s recommendations for a review of the Financial Advisers Act.

It wants a conduct obligation to place the consumer’s interests first applied to all participants, consistent with the obligation currently placed on AFAs by their code of conduct.

“What would be required to place the interests of the consumer first would be determined by what is reasonable in the circumstances, but should be founded on what is suitable for the customer regardless of the differing incentives for the adviser or agent. This recognises that all advisers and agents have limitations on the services they can provide,” MBIE said.

“They would not be expected to consider the full range of products from across the market, but would be required to recommend the best product for the consumer from their suite. If no product that they can recommend is genuinely suitable, they would then be expected to advise the consumer on that basis.”