What financial advice can New Zealand practitioners offer clients?

Content Summary

August 2021

This article was current at the time of publication.

Accounting practitioners in New Zealand need to be mindful they don’t inadvertently provide financial advice to retail clients now that a new regulatory regime – which took effect 15 March 2021 – is in place.

The three previous levels of financial advisers have been removed. All financial advisers must now meet the same standards and are subject to the Code of Professional Conduct for Financial Advice Services.

Accountants are generally exempted from the new regime – with some provisos – depending on the level and extent of advice they offer clients during the standard course of business. 

“The first question I would ask myself if I was an accountant is: ‘Am I excluded from the new regime?’” says Michael Hewes, Head of Financial Advice at the Financial Markets Authority (FMA). 

“The exclusion for accountants is largely the same but the regime as a whole is a big change for financial advice in New Zealand,” Hewes says. 

“It brings in a lot of those that weren’t in our remit directly before, such as mortgage and insurance advisers.”

Narrow exclusion terms

If you’re a qualified statutory accountant, you may be excluded from the new regime. On the other hand, a couple of things make the exclusion quite narrow.

According to Hewes, one is that the advice be given in the ordinary course of carrying on your occupation. The second is that it needs to be an ancillary part of carrying on the principal activity of your occupation.

“For example, if I am a tax accountant and advising a client to dispose of something to meet their tax obligations, that advice is ancillary of my principal activity,” he says. 

“But [if] my client wants a second opinion on an investment plan another financial adviser has set up, that is likely not excluded.” 

Hewes notes practitioners should avoid recommending or giving an opinion on the acquisition or disposal of financial products covered in the Financial Markets Authority Act 2011

Accountants who have clients with trusts should also be mindful when discussing the disposal or acquisition of investments and certain products because it may fall outside the exclusion. 

Who needs to be licensed?

One of the biggest changes is that you now need a licence through the FMA to provide regulated financial advice in New Zealand or operate under a licensed financial advice provider (FAP). 

“Part of the regime entails new obligations for FAPs and their financial advisers,” Hewes says. “We call them duty provisions [and] they are quite principles-based.”

“For the first time, you have consistency against that broader advice market in New Zealand. We did have advisers that were unlicensed by us and then there were also advisers that registered through a government website. 

“For us as a regulator, it was quite hard to go through and be consistent.”

More than 10,700 financial advisers have come into the new licensing system, with more than 1800 transitional licences approved with nearly 1200 authorised bodies. 

For more information on the revised financial advice regime, the FMA website features further resources and FAQs.