Financial advisers are now obligated to disclose more information to clients, particularly regarding fees
Financial Services Complaints Limited (FSCL) has praised the Financial Services Legislation Amendment Act, which came into force on 15 March.
The legislation repeals the Financial Advisers Act 2008. In line with the changes, the Ministry of Business, Innovation and Employment outlined the information that financial advisers are now required to disclose:
FSCL chief executive Susan Taylor applauded the new regime and called it a positive step towards bolstering standards in the industry.
“We believe the new disclosure regulations which form part of the new rules, including disclosing fees, commissions earned and conflicts of interest are important in ensuring transparency. The client needs to understand what they are paying for,” she said in a media release.
Taylor cited a recent incident handled by FSCL in which a pair of small business owners were bilked by their insurance broker. Due to the vague nature of the information the broker was required to provide, the business owners ended up paying over $30,000 in “policy charges.”
The broker justified the action by pointing out that they were only obligated to let their clients know that they might charge a fee.
“It is OK to charge fees, but it is not OK to hide them. If you hide them, then you do not have your customer’s genuine agreement to pay them,” Taylor said.
FSCL decided in favour of the business owners, citing the misleading nature of the broker’s coverage summaries. FSCL also determined that the summaries violated the Fair Trading Act 1986.
Cases like this, the organisation said, show the importance of transparency on the part of financial advisers.
Other changes outlined in the Financial Services Legislation Amendment Act include additional requirements for licensing.
