David Whyte has a nicely provocative title for his article on goodreturns: "Client-first may be too big an ask for biggest players" - although I think the issue is as important for small advice businesses as it is for big ones. The article is long but well worth a read because the issue of advice versus no-advice is an important one. Highlights include his comments on the 'approved product list of one'.
Boundaries are critical in law. Does this law affect you or not? The answer should be clear to everyone - whether they are a financial adviser or not. Although in some respects, and I am surprised to find myself saying this, the article is not long enough.
More can be said on the definition of the boundary between sales and advice, and it is about more than just the 'biggest players' versus, presumably smaller, 'financial advisers'. Take this point:
"The NZ regulator chose to discard any suggestion that differences between selling and advising be enshrined in the review, in the mistaken belief that drawing such a distinction would favour one distribution model over another."
The distinction was certainly left out, but I am not sure that was the reason it was left out. Whether you agree with it or not - and my compliance adviser, and others in the industry have had some heated debates over the issue, I think that for those drafting the law at MBIE the decision was this: if you do not give financial advice, you are outside the regime. The distinction is that you cannot call yourself a financial adviser. They do not seek to prescribe what you can call yourself, but you aren't allowed to use the term financial adviser.
If you are a financial adviser, and you wish to switch from giving advice to providing an execution-only service, there are some concerns that switch - especially if it happens in the course of one meeting - may confuse the customer. They may wonder, am I still getting advice? Or they may not wonder at all - and simply assume that they are still getting advice. This is an issue which affects most financial advisers - nearly everyone, big business or sole trader, likes the ability to just make a sale, without advice, from time to time. In this case, process and labeling becomes more important. We are interested in exactly what guidance comes from the FMA on that point, but it is unlikely that we will see further detail in the draft law.
In some respects the new law will push further into the territory which is currently outside the oversight of the Financial Advisers Act. It is proposed that the FMA be granted the power to designate some activities as advice, which may be outside the regime right now. Refer to my previous post on that point for more detail.