A code of conduct for financial advice has been approved by the Commerce Minister and will come into effect in about nine months’ time.
The code sits alongside the new advice legislation, which creates a level playing field for everyone giving financial advice.
Those who have been in the industry before the introduction of the code will have a transitional period of two years in which to comply with the competency standards.
It requires, among other things, that all advisers can demonstrate they are operating with capabilities equivalent to the general qualification outcomes of the New Zealand Certificate in Financial Services Level 5.
The simplest way to do this is expected to be to have completed the qualification or to work as a representative of a company with the processes to backfill any gaps in knowledge.
Other requirements may also mean changes for those who do not have sufficient existing systems and processes in place.
Advisers will be required to show that they treat clients fairly – including not applying undue pressure, act with integrity, give financial advice that is suitable, ensure their clients understand the advice, and protect client information.
Ensuring the advice was suitable should include having reasonable grounds for the advice.
“Depending on the nature and scope of the financial advice, a detailed analysis of the client’s circumstances may be required or it may be reasonable to make assumptions about the client’s circumstances based on particular characteristics of the client,” the code’s guidance says.
“If the financial advice includes a comparison between two or more financial advice products, the financial advice should be based on an assessment of each product.”
There is also a requirement to complete continuing professional development.
While a number of hours of CPD has not been prescribed, advisers will have to, at least annually, plan for and progressively complete learning activities to ensure they maintain the knowledge, skill and competence for the advice they give and keep up-to-date with the regulatory framework.
Entities must, at least annually, review their procedures, systems and expertise to ensure that they maintain the capabilities for the financial advice they give.
PART 1:
ETHICAL BEHAVIOUR, CONDUCT, AND CLIENT CARE
1. Treat clients fairly
2. Act with integrity
3. Give financial advice that is suitable
4. Ensure that the client understands the financial advice
5. Protect client information
PART 2:
COMPETENCE, KNOWLEDGE, AND SKILL
6. Have general competence, knowledge, and skill
7. Have particular competence, knowledge, and skill for designing an investment plan
8. Have particular competence, knowledge, and skill for product advice
9. Keep competence, knowledge, and skill up-to-date
