NZ Financial Advisory Services Framework

It is important for CAs to understand the regulations when providing financial advisory services.

In brief

  • All financial advisers must comply with the requirements of the Financial Advisers Act 2008 (the Act). Some activities may require authorisation or registration
  • The Act provides exemptions for specific groups of people who only provide financial adviser services in the ordinary course of their jobs or as incidental to their jobs
  • The compliance requirements for financial advisers depend on the types of services you provide and the type of adviser you are

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Regulation of financial advisory services

Financial advisers provide advice about investing and other financial services and products.

There are different types of financial advisers. All financial advisers must comply with the requirements of the Financial Advisers Act 2008 (the Act). Some activities may require authorisation or registration.

The legislation covers the following business activities:

  • Giving financial advice - making a recommendation, or providing an opinion to a client in relation to the acquiring or disposing of a financial product.
  • Providing an investment planning service - to design (or offer to design) for a client a plan which analyses an individual's overall current and future financial situation (including investment needs), identifies their investment goals and gives a recommendation or opinion on how to realise some or all of those goals.
  • Providing a discretionary investment management service - to decide which financial products to acquire or dispose of on behalf of a client, while acting under an authority granted to manage some or all of the client's holdings of financial products.

The Act provides exemptions for specific groups of people who only provide financial adviser services in the ordinary course of their jobs or as incidental to their jobs. Sections 13 and 14 of the Act provides a list of financial adviser services not covered by the Act.

For CAs this means:

  • You will not be considered to be providing financial adviser services when providing services in the ordinary course of business as a CA.
  • A service provided as an incidental part of a non-financial service is deemed not to be a financial adviser service. A service is "incidental" if it is carried out to facilitate the CA business, or is ancillary to the CA business.

If either of the above exemptions apply in the specific set of circumstances then a CA is not required to register or become authorised to provide these services.

More information

View the Financial Advisers Act 2008

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Types of financial adviser services

To work out which type of adviser you are (or want to be) you need to think about:

  • How you give financial advice – giving financial advice is making a recommendation, or giving an opinion about acquiring, holding or disposing of a financial product. Providing factual information only about a financial product, in the absence of any recommendation or opinion would not be considered financial advice. For more information see section 10 of the Act.
  • Whether you advise retail or wholesale clients - the type of clients an adviser works with affects the type of adviser you are, and what you need to do to comply. Retail clients are any clients who are not considered 'wholesale' clients. Wholesale clients are defined in section 5C of the Act.
  • Whether you provide personalised or class services - a personalised service is one that is given to a client who is readily identifiable by the adviser and, either the adviser has taken the person's individual situation into account, or the client would expect their individual situation to be taken into account. For more information see section 15 of the Act. Class service is anything that is not a personalised service, e.g. brochures, seminars and internet material targeted towards a wide class of people rather than an individual. For more information see section 15 of the Act.
  • Whether you provide advice on category 1 or category 2 products - Category 1 and 2 products are described in section 5 of the Act. Category 1 products include securities and investment related products, while Category 2 products include bank deposit and insurance related products. Some category 1 and category 2 products are defined further in the Financial Advisers (Definitions, Voluntary Authorisation, Prescribed Entities, and Exemptions) Regulations 2011. The FMA also has a product definition guide to category 1 and 2 products.

More information

View the Financial Advisers (Definitions, Voluntary Authorisation, Prescribed Entities, and Exemptions) Regulations 2011

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FMA product guide

View the FMA product definition guide to category 1 and 2 products

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Types of financial advisers

The compliance requirements for financial advisers depend on the types of services you provide (as detailed above) and the type of adviser you are.

Advisers are classified into the following categories:

  • Registered Financial Advisers (RFAs) - RFAs are individuals and they can give financial advice in relation to a category 2 product. They can also provide class advice and investment planning services to retail clients and financial adviser services to wholesale clients.
  • Authorised Financial Advisers (AFAs) - AFAs can provide the same services as an RFA, but can also provide services in relation to category 1 products, and can provide an investment planning service. In relation to CAs as part of the requirements for applicants to become an Authorised Financial Adviser, FMA requires that individuals secure a signed testimonial form from their membership body. For CAs the testimonial form needs to be completed and signed in part 1 and then submitted for processing. Upon completion CA ANZ will return the completed form to the member so that they can include it with their application to FMA.
  • Qualifying Financial Entity Advisers (QFEs) - A QFE Adviser is an employee or a nominated representative of a Qualifying Financial Entity (for example banks).
  • Other businesses providing financial adviser services - Other (non-QFE) businesses providing financial adviser services have to be registered as a financial service provider. They may only provide personalised services to retail clients through an individual who is appropriately authorised or registered.
  • Brokers - A broker is an individual or a company that receives, holds, pays or transfers client money or property acting as an intermediary for a client. All brokers need to be registered and must also comply with the brokers' conduct and disclosure obligations in the Act. These provisions apply to anyone providing broking services, whether they are a financial adviser or not.

More information

Access the FMA testimonial forms

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Ongoing obligations

In all cases the Code of Ethics applies and members must ensure they are competent to undertake the services they are being asked to provide. In addition as a financial adviser CAs also need to abide by the Financial Advisory Engagement Standard (FAES). The Standard establishes mandatory requirements and provides explanatory guidance for members and members’ firms undertaking financial advisory engagements. It applies whether or not members hold a Certificate of Public Practice.

If you provide a personalised service to a retail client, you must disclose certain information. The principle behind disclosure is to provide the essential information your client needs to make an informed decision.

It must not be misleading, deceptive or confusing. Any additional information you decide to provide to a client must not be misleading, deceptive or confusing either. For example, if you decide to provide accompanying information about your qualifications, make sure your client understands the relevance to the service they are considering.

Disclosure must be made before the advice or service is provided, or if that is not practicable, as soon as practicable after the service is provided (section 22(1) of the Act).

Disclosure obligations are set out in the Financial Advisers (Disclosure) Regulations 2010. AFAs also need to comply with Standard 7 in the Code of Professional Conduct for AFAs, which may require additional information to be provided to clients. A revised Code came into force on 1 December 2016 – see further details below. QFEs are subject to additional requirements set out in the FMA’s standard conditions for QFEs.

More information

View the Financial Advisers(Disclosure) Regulations 2010 and the FMA's Standard Conditions for QFEs.

Financial Advisers (Disclosure) Reguations 2010Standard Conditions for QFEs

Members Handbook

Access the Financial Advisory Engagement Standard (FAES) in our Members Handbook

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Review of the regulation around the provision of financial advice

The Ministry of Business Innovation and Employment (MBIE) released a report; Review of the operation of the Financial Advisers Act 2008 and the Financial Services Providers (Registration and Dispute Resolution) Act 2008, following a review of the regulation around the provision of financial advice.

The report provides an overview of the current regime and financial advice market and a range of recommendations. These are very extensive changes for the industry. A summary of the changes can be found in the “Factsheet” on the MBIE website.

In summary the key elements of the recommended regime are to:

  • Remove the regulatory boundaries which are preventing the provision of some types of advice.
  • Establish conduct and competency requirements for all financial advisers. All financial advice should put the consumers’ interests first, and be subject to a Code of Conduct.
  • Require anyone (or any robo-advice platform) providing financial advice to be subject to active regulatory oversight.
  • Create three types of advisers – ‘financial advisers’ would be individually accountable for complying with the legislative and code obligations, and ‘agents’ would be the responsibility of ‘financial advice firms’.
  • Remove unclear terminology and introduce simplified and common disclosure requirements.

A component of the review included assessing the current exemptions that exist in the regulatory framework. The review resulted is retention of the current exemption that applies to CAs.

Members are encouraged to review the factsheet to understand the direction the financial services industry is heading.

In addition to the above review a revised Code of Professional Conduct for Authorised Financial Advisers (AFAs) is now in effect. The updated Code came into force on 1 December 2016.

Access MBIE report

Read the full MBIE report on the regulation review

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Code of Professional Conduct

A revised Code of Professional Conduct for AFAs came into force on 1 December 2016

Find out more