The following is the response from Rose Wang of MBIE to the outstanding questions from members asked during this webinar.

1. Confirmation that admin/processing fees charged (eg for processing policies) are not captured by disclosure as they are not fees for advice. 

 

If the admin/processing fees are in relation to the giving of advice, then this needs to be disclosed 1) in the publicly available information, 2) when the nature and scope of the advice is known, and 3) at the time of giving the advice.

 

If the admin/processing fees are not in relation to the giving of advice, but relate to acting on the advice (e.g. adviser recommends XYZ policy and the admin/processing fee is charged if the client takes up XYZ policy) then the adviser must at the time of giving the advice state that further fees in relation to acting on the advice may be payable.

 

Regardless of what the disclosure regulations require, we expect advisers would in any case be transparent about the fees that a client may incur before the client incurs those fees. 

 

2. Is the FMA able to approve a set of documents that FAPs intend to use for disclosure?

 

Unfortunately, this isn’t the FMA’s role.  The new disclosure regime is principles-based.  It’s designed to be flexible and circumstance-specific so that clients and prospective clients receive relevant information at the relevant time – and that will change, depending on the circumstances. We and the FMA will continue to consider what further guidance may be helpful for advisers on the disclosure requirements.

 

3. Is a range of commission % able to be used when advising on multiple products from multiple insurers, multiple products from one insurer, or one product from multiple insurers?

 

At the stage when the nature and scope of the advice is known, a range can be disclosed in terms of the commission that may be applicable across the range of products that the adviser would consider for the client.

 

At the point of giving the advice, the specific commission for each product recommended to the client must be disclosed as a specific figure or percentage.

 

This is illustrated by the example with Connor and Ari in clauses 5 and 6 in the schedule of the regulations. We are happy to discuss examples of how this may work in practice.

 

4. Do fees have to be in $$ if they are charged in $$ and in % if they are charged as a %?

 

The regulations require disclosure of the amount of fees payable (if known) in relation to the giving of the advice at the point when the nature and scope of the advice is known and at the point of giving the advice. 

 

This means that an actual (dollar) amount should be disclosed, if known or capable of being calculated, even if the fee is otherwise expressed as a percentage

 

If the actual amount isn’t known at the relevant time, the regulations require a brief explanation of how that amount will be determined and, if practicable, an estimate of that amount.

 

5. What further guidance will be provided by FMA and MBIE regarding disclosure and when will that be?

 

We are considering publishing a reader-friendly summary of the disclosure requirements, along with one or two worked examples. We expect these will be available later this year.

 

6. Is the correct email address for any further questions: faareview@mbie.govt.nz

 

Information about the intent of the regulations can be directed to faareview@mbie.govt.nz

You can also contact the FMA at questions@fma.govt.nz.

 

FURTHER FEE AND COMMISSION CLARIFICATIONS RECEIVED FROM MBIE RECEIVED 18/9/2020

In regards to commissions:

1.At the stage when the nature and scope of the advice is known, the ‘brief explanation or description’ could include a range of the commissions that may be applicable across the range of products that the adviser would consider for the client. See e.g. the example which refers to a range of between 7-12%.

2.At the point of giving the advice, the specific commission for each product recommended to the client must be disclosed (i.e. rather than a range).

3.The amount or value of commissions should be disclosed in dollar terms or as a percentage (or, if not known, how the commission is determined). 

 

 

In regards to fees:

4.If fees are in relation to the giving of advice, then this needs to be disclosed 1) in the publicly available information, 2) when the nature and scope of the advice is known, and 3) at the time of giving the advice.

5.If fees are not in relation to the giving of advice, but relate to acting on the advice, then the adviser must at the time of giving the advice state that further fees in relation to acting on the advice may be payable.

6. even where the fee is not charged directly for the advice, but relates to acting on the advice (e.g. adviser recommends XYZ policy and the admin/processing fee is charged if the client takes up XYZ policy) then the adviser must at the time of giving the advice state that further fees in relation to acting on the advice may be payable.

7.Regardless of what the disclosure regulations require, we expect advisers would in any case be transparent about the fees that a client may incur before the client incurs those fees.

8.Actual dollar fee amounts should be disclosed, if known or capable of being calculated, at the point when the nature and scope of the advice is known and at the point of giving the advice.

9.If the actual fee amount isn’t known at the relevant time, the regulations require a brief explanation of how that amount will be determined and, if practicable, an estimate of that amount.

 

Ministry of Business Innovation and Enterprise