There have been many submissions on the topic of CoFI. AIA, Cigna, Fidelity Life, Partners Life and AMP have shared their views in regard to the implications CoFI will have on advisers, commission as well as the scope of COFI and the time needed.
Fidelity has stated their concern for potential adviser issues and customer confusion relating to advisers having to comply with different fair conduct programmes. Gail Costa, CEO of Cigna, has said that because of CoFI, advisers could end up preferring one provider's conduct programmes to simplify their compliance obligations, causing a conflict of interest. Partners Life have said that advisers should not be caught by the bill at all. While AIA have said that advisers that were not licensed under FSLAA should be the only ones affected by CoFI.
“While submitters voiced support for the overall intention of the bill, all raised concerns about how it has been drafted.
Significant concern related to how advisers will be dealt with under the bill. There is a carve-out for financial advice providers, but not necessarily for individual advisers, in its current form.
That could mean all advisers had to show compliance with the financial advice providers’ conduct programme, as well as meeting their own obligations under FSLAA.”
When discussing commission, Fidelity said that CoFI could create uncertainty and affect participants’ ability to plan for the future. Nick Stanhope has said that change in commission, will create very high levels of regulatory risk.
“Submitters were concerned that the bill left open the option of regulators introducing new rules for commission structures, without any legislation change being required.”
Another area or concern was the scope of CoFI. AMP stated that they were concerned that being considered a financial institution would increase costs. And Partners Life has said that there is a risk that CoFI is going to create an uneven playing field. KiwiSaver customers would have protection through the bill if they were with a bank but not through a fund manager.
“Many submitters were worried about the scope of the new bill. Some said it was too broad – AMP Wealth Management New Zealand said it was concerned about being included as a financial institution – the cost of licensing would affect its ability to keep costs down. The Securities Industry Association said it seemed that NZX trading, and advising market participants, had been inadvertently captured as intermediaries.
But Partners Life said there was a risk it would create an uneven playing field – a customer would have protection through the bill if they were in KiwiSaver through a bank but not through a fund manager.”
The last area that has created mass concern is time. Nick Stanhope has said that FSLAA should be given enough time to be implemented before more regulations are introduced. David Ireland, partner at Dentons Kensington Swan has also expressed his concern saying that CoFI hasn’t gone through the same level of consultation as other significant regulatory changes.
““No consultation draft was released for public feedback, with no opportunity to debate the outcome of the one round of consultation on the issues paper released last year. The outcome is a bill that provides a framework for a new regime, but with many of the details not fully formed and with many uncertainties as to scope and practical application.
“Conduct licensing is complex. A new regime as significant as this one ought not to be rushed through.”” Click here to read more
In other news:
FSC set to host Reserve Bank on CEO Roundtable 11 June 2020
FSC to make oral submission to the Finance and Expenditure CoFI 10 June 2020