The long-awaited Code of Professional Conduct for Financial Advice Services (The Code) was approved by the Minister and published on 7 May 2019. This now sets the clock ticking and theoretically, in 9 months’ time (February 2020), all those providing regulated financial advice to retail clients will need to be abiding by the code plus the new legislation and regulation.
The Code contains no major surprises from the earlier draft. It is principles-based and not prescriptive. Good conduct obligations relating to ethical behaviour, conduct and client care should guide interpretation of the principles so that higher rather than lower standards of professionalism are adopted within financial advice providers (FAPs). Avoid focussing on individual wording and phrases and instead, look at the overarching intent behind the Code and take the higher ground.
The Code is only eight pages long and can easily be read in 10 minutes.
Key points about the new Code:
- The New Zealand Certificate in Financial Services(Level 5) version 2 (NZCFS5) is the standard of general competence, knowledge and skill which needs to be attained by those providing advice. This can be demonstrated by holding either version 1 or 2 of the NZCFS5, the old National Certificate in Financial Services (Financial Advice) (Level 5) or was an AFA immediately prior to the commencement of the new Code.
- Competence, knowledge and skill relating to particular product advice is defined as holding the relevant specialist strands of NZCFS5 versions 1 or 2, the relevant specialist standard sets of the old level 5 qualification or being an AFA permitted to provide financial advice in those areas.
- If a person provides advice in multiple product areas, e.g. personal risk, mortgages and investment, then the person will be expected to have attained all those relevant specialist strands.
- There is a CPD requirement but no mandated minimum number of hours. There is an expectation that a person who gives financial advice will have documents in place to plan and record their CPD and ensure they maintain their capabilities.
- There are alternative ways to demonstrate competence, knowledge and skill but these can be expensive and time-consuming. Talk with Strategi Institute to obtain details specific to your situation.
- Financial advice must be suitable for the client and steps need to be taken to ensure that a client understands the financial advice provided. This will necessitate a revamp of many financial adviser business advice processes and templates to ensure that Code requirements are met.
Key messages from Strategi Group:
- Take 10 minutes and read the Code.
- Don’t delay in commencing your level 5 qualification. Strategi Institute will be providing ‘closing the gaps’ courses in 2021 to backfill any gaps in adviser competence, knowledge and skill.
- The regulatory timeclock has now commenced and you will need to be compliant with the new legs, regs and code in about 9 months’ time.
- Attaining your level 5 qualification and becoming a FAP is not difficult or expensive but it does take time.
- Strategi Group is here to support financial advisers, businesses and product providers in this regulatory transition. We have an extensive range of services available.