Regulatory changes for financial advice

A new financial advice regime came into force on 15 March 2021

The Financial Services Legislation Amendment Act 2019 has made significant changes to the way financial advice is regulated and delivered in New Zealand.

What has changed?

The new regulatory regime for financial advice includes:

  • new classifications for financial service providers
  • changes to existing financial services
  • a code of conduct, introducing new standards of competence and professional conduct
  • new requirements that ensure the interests of clients comes first
  • the removal of the distinctions between class and personalised advice
  • new requirements for registration on the Financial Service Providers Register (FSPR), to prevent its misuse.

Financial service providers offering a financial advice service had until 15 March 2021 to apply for a transitional licence as a financial advice provider. After 2 years all transitional licences expire and financial advice providers must hold or operate under a full licence to continue giving regulated financial advice to retail customers.

The Financial Markets Authority (FMA) has set 30 September 2022 as the target date by when all transitional financial advice providers should apply for their Class 1 or Class 2 full licences.

For Class 3 licence applicants, the target date is 30 June 2022.

For more information on these dates and the licence classes they relate to, please visit the FMA’s website.

Who needs to register

Under the Financial Service Providers (Registration and Dispute Resolution) Act 2008, an FSP is now required to register on the FSPR if any of the following applies:

  • it provides financial services to persons in New Zealand above a minimum threshold
  • it is a reporting entity under the Anti Money Laundering and Countering Financing of Terrorism Act 2009 that provides financial services
  • it is licensed to provide a financial service, or required by another Act to be licensed or registered in relation to a specific financial service.

Key changes for providers of financial advice

Under the new regime, advice can only be provided by, or on behalf of, a financial advice provider licensed by the Financial Markets Authority (FMA).

The categories of authorised financial advisers (AFAs), registered financial advisers (RFAs) and qualifying financial entities/advisers (QFEs) have been replaced with the new categories of:

  • financial advice providers
  • financial advisers
  • nominated representatives.

The requirement for personalised advice to be given by a ‘natural person’ has also been removed, allowing for new ways or providing advice.

Financial advice providers

A financial advice provider (FAP) is a business or individual providing regulated financial advice to retail clients. All FAPs must be registered on the FSPR, and be licensed by the FMA.

A FAP can provide advice directly, and/or through financial advisers and nominated representatives (see below).

Financial advisers

Financial advisers are individuals who give regulated financial advice to retail clients on behalf of a FAP. They must be registered on the FSPR and engaged by, or ‘linked to’ a licensed FAP in order to give financial advice.

Those registered as an ‘authorised financial adviser’ or a ‘registered financial adviser’ before 15 March 2021 were automatically reclassified as a ‘financial adviser’ at the start of the new regime. These individuals have three months from 15 March 2021 to be engaged by a FAP.  If they haven’t done so within 3 months, they may be deregistered or be required to remove the financial adviser service from their registration.

Nominated representatives

Nominated representatives are engaged by a licensed financial advice provider to give regulated financial advice on their behalf. Nominated representatives do not need to be registered on the FSPR, but must be engaged by a licensed FAP who must limit the nature and scope of the advice its nominated representatives can give.

Financial services that have changed

As certain financial services have changed, you’ll need to update certain information on the new FSPR, if you haven’t done so already. This applies to the following services:

  • being a creditor under a credit contract
  • broking service (including a custodial service)
  • employer or principal of a financial adviser and/or qualifying financial entity (QFE)
  • qualifying financial entity (QFE)
  • wholesale and/or generic financial advice

FSPs offering these services will have received instructions from us prior to the launch of the new register, explaining what they need to do.

Financial services we’ve transferred for you

We’ve migrated the following services to the new register based on information held on FSPR or by Financial Markets Authority:

  • authorised financial adviser (AFA)
  • financial adviser
  • insurer
  • issuing and managing means of payment
  • operating of a financial product market
  • participating in an FMC offer as an issuer or offeror of financial products
  • providing a crowdfunding service
  • providing a peer-to-peer lending service
  • trading financial products or foreign change on behalf of other persons.

You’ll need to update certain information about the following services once the new register has gone live on 15 March 2021:

  • DIMS provider
  • Derivatives issuer
  • Manager of registered scheme (other than restricted scheme).

FSPs offering these services will have received instructions from us prior to the launch of the new register, explaining what they need to do.

Financial services that haven’t changed

Because the following financial services have not changed within the new Financial Services Legislation Amendment Act (FSLAA), we’ve transferred these services to the new FSPR automatically:

  • acting as an investment manager for a registered scheme
  • acting as an issuer for regulated products or financial products
  • offered under an FMC offer
  • changing foreign currency
  • custodian of DIMS licensee
  • custodian of registered scheme
  • giving financial guarantees
  • independent trustee of restricted scheme
  • keeping, investing, administering, or managing money, securities, or investment portfolios on behalf of other persons
  • non-bank deposit taker
  • operating a money or value transfer service
  • providing forward foreign exchange contracts
  • registered bank
  • supervisor of a registered scheme
  • supervisor of a regulated offer of debt securities.

Licensing as a financial advice provider

There are different ways to be licensed as a financial advice provider (FAP) under the new regime, depending on how you want your business to be structured:

  • you can be licensed as an individual (holding a licence in your own name)
  • you can be licensed as a business (holding a licence in the company’s name)
  • a licence may also, if allowed in its conditions, authorise one or more named entities (as ‘authorised bodies’) to provide a financial advice service covered by the licence.

Any of these types of FAP can engage with financial advisers.

The Financial Markets Authority (FMA) provides an online tool to help you navigate your options. It is important to note that the tool does not cover all possibilities, and more complex business arrangements that may apply to larger organisations are not included.

Regulations to address misuse of the FSPR

New requirements to address misuse of the register include the following measures:

  • the introduction of a new minimum business threshold when registering, and maintaining a registration, in relation to certain financial services
  • some FSP’s not previously required to register must now do so – this is expected to predominantly affect offshore providers that have clients in New Zealand
  • limitations on FSPs promoting their registration on the FSPR.

Confirming you meet the threshold

When registering, FSPs must now confirm that they expect to meet a minimum business threshold. This requires that they provide:

  • financial services to 10 or more New Zealand resident clients; and
  • to those New Zealand resident clients, financial services valued at NZD $10,000 or more in total.

They must also confirm, within the first 6 months, that they will have 5 New Zealand resident clients and NZD $5,000 of transactions with those clients.

Every year when it is time to file an annual confirmation, the FSP must confirm that they continue to meet the threshold.

 

All help topics

Getting started on the register 4 guides

A new financial advice regime came into effect on 15 March 2021 which also brought about changes to the Financial Service Providers Register.

Registering a financial service provider (FSP) 9 guides

Dispute resolution schemes (DRSs) 2 guides

If you provide financial services to retail clients, you must join a DRS within 10 working days of registering and keep your membership details up to date on the Financial Service Providers Register (FSPR).

Providing licensed or certified services 5 guides

Filing an annual confirmation 3 guides

To remain registered as a financial service provider (FSP) you must confirm your FSP's details and services each year. Find out how to file your confirmation online, or to change the month you do it

Managing your registration as a financial service provider (FSP) 6 guides

Deregistration and reregistration 3 guides

You can voluntarily deregister a financial service provider (FSP), or it may be deregistered by the Registrar. In some circumstances you can object to a deregistration, or apply to have the FSP reregistered.

Paying fees and levies 3 guides

If you're a financial service provider (FSP), you pay fees for some transactions, including registration. You also pay levies to the Financial Markets Authority (FMA). There are several ways to pay.

Managing your online services account 6 guides

Your FSPR online services account allows you to keep your FSP's contact and payment details up to date. From your account dashboard you can view and manage outstanding applications and tasks.