Disclosure

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DISCLOSURE

NR19 - Disclosure-245

Updated 21 January 2019
In the new financial advice regime, the approach to disclosure is changing. The Ministry of Business, Innovation and Employment (MBIE) released a consultation paper on 10 April 2018, which suggests the direction they are heading.

The disclosure regulations will apply to anyone who gives financial advice to retail clients (this includes robo-advice), and may also impact wholesale advice.

MBIE proposes regulations that set out what to disclose and when, but not how. This is intended to ensure that the regulations are flexible enough to adapt to innovation.
 

Jump to sections
 
Publicly available information | By the time nature and scope is known
When making a recommendation | Other points of disclosure
Some areas of uncertainty | Next Steps
 


Publicly available information
Each financial advice provider (FAP) would have to disclose the following information publicly, such as on its website, or provide it to clients on request:
  • That the FAP holds a licence issued by the FMA, and is subject to conduct and client care duties (including a Code of Conduct).
  • Details about the FAP’s complaints resolution process, and that clients have free access to their disputes resolution scheme.
  • A general description of limitations on the nature and scope of the advice they can give.
  • Whether the FAP charges fees to give financial advice.
  • Whether the FAP pays or receives commission or other incentives, and any other conflicts of interest.
     


By the time nature and scope is known
By the time the nature and scope of advice is known, the following information would be disclosed:
  • Relevant disciplinary history of the financial adviser and/or the FAP (e.g. by the FMA), and insolvency or bankruptcy history.
  • Details of the nature and scope of advice, including the providers whose products will be considered, and limitations on the advice.
  • Details of commissions or incentives that the adviser and FAP may receive, and about material conflicts of interest.
  • A reasonable estimate of fees, and the basis on which they are charged (before the client incurs charges).
     


When making a recommendation
The following information would be disclosed when making a recommendation:
  • Any material changes to the nature and scope of advice (e.g. if only a subset of providers or products was considered).
  • Details of specific conflicts of interest, including specific commissions and incentives.
  • Any additional expenses that the client may incur (e.g. commission clawbacks on-charged to the client if the policy is cancelled.)
     


Other points of disclosure
There are miscellaneous times when relevant information would have to be disclosed:
  • Before the client incurs any charges, the details of and basis for the charge.
  • When a client complains, details of the FAP’s dispute resolution scheme.
 
 
Some areas of uncertainty
MBIE were undecided on some points, and sought feedback during the consultation:
  • Should there be a prescribed summary disclosure document?
  • Should it be possible to disclose verbally? Should there be additional requirements if disclosure is verbal or online?
  • Should there be additional disclosure requirements for replacement business, e.g. the risks of replacement?
  • Should there be reduced requirements when disclosing to existing clients?
  • Will there be enough time to adapt, or should there be a transition period?
  • Should wholesale clients be informed of their ability to opt-out, and be treated as retail clients?


Next steps
In the first half of 2019, we expect MBIE to release further information about disclosure. This may include a draft of the regulations. Read the Consultation paper on disclosure. 
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About Us

The Financial Services Council is a non-profit member organisation and the voice of the financial services sector in New Zealand. Learn more
     

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