With regulatory changes finalising, the industry is working to adjust. This has resulted in a number of changes being contemplated as well as being implemented. Dealer groups have had to reconsider may aspects of their business to ensure that they are prepared for the upcoming changes. One potential change is the acquisition of a group by another.

“In the past week rumours started swirling around the market that one of the bigger groups was about to takeover/merge/acquire one of the mid-size groups.”

The impending changes to the current law has meant changes to Newpark have had to be made. Newpark is expected to announce changes to their model towards the end of next month.

“Meanwhile, Newpark is regrouping its army, but how big it will be after Partners Life new FAPO model where override commission is paid to FAPs is unknown.

Good Returns understands that Newpark will be announcing its new model around August 23. If Covid-19 hadn't rolled its dice and pushed licensing back a year it's questionable if the group would still be on the board.”

Alongside making changes to align with new regulatory standards dealer group must work to ensure that they offer advisers attractive membership services.

“For advisers there is a growing imperative to ensure they find a group that fits with their own beliefs and business practices.

For dealer groups the pressure is coming on to deliver appropriate services to their members at the right price points.”  Click here to read more

In other news:

FSCL: Dispute service sees complaints rise by 40%

Southern Cross: Insurance companies among finalists for awards championing diversity

FANZ: Trusted Adviser mark attracts “strong and supportive” feedback

Commerce Commission: Commerce Commission release advising the Court of Appeal issued a ruling in the case regarding Harmoney’s lending model. In a judgment issued on 8 July the Court said that: Harmoney Limited is a creditor, its contracts are consumer credit contracts which are subject to the requirements of the CCCF Act, its platform fee is therefore a credit fee that is required by the CCCF Act to be reasonable. 

A liquidator has provided a report detailing the activities of Barry Kloogh who plead guilty to charges in March. The liquidator examined over 100,000 transactions as well as bank transactions dating back to 2012 to understand if stolen funds were used to make purchases on behalf of other clients. In cases like this, false profits could be clawed back. Although the investigation found that a small group of clients were not affected by Kloogh’s actions, the liquidator found that clients that had paid by cheque were given false account details.

“The liquidator reviewed more than 100,000 transactions, plus bank transactions for Kloogh’s companies accounts, going back to 2012.

 

They found “a small number” of clients were not affected by Kloogh’s fraud. Their names had been provided to investigators by Kloogh, and their accounts were released to them once the information was confirmed as being correct.

 

However, the much larger task of reviewing transactions involving defrauded clients remains. That was because funds paid by cheque had been diverted, or given false bank account details.

 

Investigators were trying to find instances where stolen funds from Impact Enterprises Ltd were used to purchase other assets in another client’s name.”

 

“The liquidator noted any “fictitious profits” – not the underlying capital investment – were liable to be clawed back for the benefit of other investors.

The liquidator is set to investigate further but has found that clients weren’t given access to the platform Kloogh had in place to provide an overview of client investments. Instead, the platform was used to track what Kloogh had stolen. Kloogh is set to be sentenced on 31 July 2020.

“The report also notes Kloogh’s clients were not given access to a platform designed to provide an overview of their investments.

It appeared Kloogh used the platform to keep track of ‘’what he had stolen from his clients in order to evade detection’’.

Kloogh will be sentenced on July 31.” Click here to read more

In other news: 

FANZ: Financial Advice NZ's Conference 2020, Bounce will be held around the country and virtually September 21-24

FSC webinar: Compliance with Financial Advisers Act between now and March 15 2021 webinar

FSC webinar: An update from FMA, MBIE and Code Working Group webinar

RBNZ: RBNZ announced two senior leadership appointments in the Reserve Bank’s Money Group, being a new head of Money and Cash, and head of a new Payment Services Department

During Financial Advice NZ’s webinar Sharon Corbett and Rose Wang from MBIE discussed the new disclosure requirement. The regulation will be split into three sections. Adviser businesses will be expected to state on their websites the necessary information prospective clients need to choose the right financial adviser. More information will need to be provided when the nature and scope of advice is known. And lastly, more disclosure will be required once the advice is provided. Commission or incentives that advisers or FAPs are paid will be part of the information that needs to be outlined. This is expected to alert clients of potential conflicts of interest.

“The regulations have three parts: The information about a financial advice provider that needs to be on its website to ensure that consumers could choose a FAP that suits their needs, more information given when the nature and scope of advice is known, and a final tranche of disclosure when the advice is given.

As part of that, advisers are required to disclose any commissions or incentives they receive that a reasonable client might think might materially influence their advice.

If the adviser was paid a salary but their FAP received commission that would need to be disclosed if a client might think it would be a factor.”

The goal of the new disclosure regulation will be to give customers all the necessary information that they need in a more efficient way. The change focuses on the type of information disclosed as well as timing.

“Corbett said the focus was on moving away from a tick-box exercise where clients were given information they might not understand or have time to process, to one in which information was given in a clear and useful way at the right time to help clients make good decisions. She said disclosure too early was often forgotten or disregarded and disclosure given too late could risk leaving the client feeling locked in with an adviser.”  Click here to read more

In other news:

FSC: Generations Conference will be held at The Cordis Hotel, Auckland on Tuesday 8 and Wednesday 9 September 2020

FMA: FMA advised of its intention to recruit a new Director of Investment Management to lead a new team responsible for designing, delivering and communicating the FMA's approach to the Investment Management Sector

Next-level client insight service targets NZ advisers

Cigna’s new non-medical limits for the Assurance Extra and Business Assurance product suites have been introduced. This change is looking to make the underwriting process and getting cover easier for customers.

“As part of these ongoing improvements, I’m pleased to announce that tomorrow – 1 July, we will release new non-medical limits for our Assurance Extra and Business Assurance product suites.

We understand that the process of getting medical tests as part of the application process can be time consuming. These new limits reflect our commitment to looking out for our customers by making it easier to be processed through underwriting and get cover. The new limits will be applied to any new business currently in underwriting with us."

In other news:

FANZ: Financial Advice is looking to open registrations for the 2020 Financial Advice New Zealand Conference soon

AMP: Business Hub: AMP's Blair Vernon on the death of the office cubicle

FMA: FMA publishes Statement of Intent and Statement of Performance Expectations

FMA: FMA publishes NZX Obligations annual review

Internal affairs have reported that Cabinet have agreed to introduce an amendment to the current AML/CFT Act on 31 December 2020. All reporting entities will be required to have an independent audit completed every three years instead of every two years.

“Cabinet has agreed to introduce a new regulation to extend the default time frame for AML/CFT independent audits from two years to three years. The implementation of these regulations is the responsibility of the Ministry of Justice and until the new regulation comes into force reporting entities must comply with the current obligation to complete an independent audit every two years.”

As a result of the change in regulation, the following expectations have been set in place:

“The Ministry of Justice advises us that they propose to have the new regulation in force by 31 December 2020. This would mean: 

• Law firms, conveyancers, and new Trust and Company Service Providers are required to have their first independent audit completed by 30 June 2020. i.e. no change to the current timing.

• Accountants and bookkeepers are required to have their first independent audit completed by 30 September 2020. i.e. no change to the current timing.

• Real estate agents’ first independent audit would not be due to be completed until 31 December 2021 i.e. the independent audit due date for real estate agents would be extended from 31 December 2020 to 31 December 2021.

• For any reporting entity that has already completed its first or a subsequent independent audit when the new regulations are implemented, it will have three years from the date of the last independent audit to complete the next one.” Click here to read more Audit Guideline

In other news:

AIA: HealthScreen service has resumed

Privacy Bill: The Privacy Bill third reading was completed in Parliament under urgency in a continuation of the 24 June Parliamentary session, with the Act coming into effect on 1 Dec 2020. The NZ Herald reports the key provisions as:

• Mandatory notification of harmful privacy breaches
• Introduction of compliance orders
• Binding access determinations - If an organisation or business refuses to make personal information available upon request, the Commissioner will have the power to demand release
• Controls on the disclosure of information overseas
• New criminal offences
• Explicit application to businesses whether or not they have a legal or physical presence in New Zealand

Financial Advice NZ: Bring in the Experts: Disclosure Requirements with MBIE webinar

Southern Cross: Southern Cross supports new safe haven for at-risk pets

RBNZ: Reserve Bank welcomes new funding agreement

It has been announced that Nadine Tereora will join Partners Life as the new Chief Operating Officer. Nadine is set to join in 2021.

“It is my absolute pleasure to announce that Nadine Tereora is joining Partners Life in the role of Chief Operating Officer. While the details around her start date are still being worked out, we expect Nadine will be starting with us towards the beginning of 2021.

Having worked with Nadine in the past, and more recently having been in direct competition with her in her previous role as Chief Executive Officer at Fidelity, we are beyond delighted to be welcoming Nadine to the Partners Life team, and know that her unique mix of skills, experience and mana will be a huge asset to us as an executive team and to Partners Life as a whole.”

In other news:

Financial Advice NZ: Building on the stability of our banking system

Regulatory change needed, or halt to AMP Life sale, policyholder says

FSC webinar: Customers, complaints, code and claims - what have we learnt from COVID-19?

AIA: Progressive Care Claim Tool

Financial Advice New Zealand have voiced their approval of the new disclosure regulations that were announced by MBIE on 25 June 2020. Katrina Shanks has said that new regulations mirror what Financial Advice outlined in their CoFI submission.

“Financial Advice NZ chief executive Katrina Shanks said the new rules had picked up many of the points made in the association's submission.

“The focus of the sector during this process was to ensure the right balance between good consumer outcomes and a financial advice sector which isn’t encumbered by unreasonable red tape and adverse outcomes.

“We support regulations around disclosure made to clients – including on conflicts of interest, commissions and other incentives and disciplinary issues.”

The need for disclosure being limited to adviser fees, the products they offer advice on, their conflicts of interest, commission they receive, and how clients can contact dispute resolution services is something Financial Advice is please about.

““However, we are pleased to see a change from the draft disclosure requirements that now only requires disclosure of these matters when they would likely materially influence a client’s decision. This is something we strongly recommended in our submission to ensure disclosures were meaningful and not overwhelming for consumers.

“We were concerned the draft regulations required disclosure of product fees charged by unrelated third parties (e.g. insurance premiums) so the removal of the requirement to disclose fees for ‘acting on the advice’ was a sensible move."” Click here to read more

In other news:

FSC: FSC 2020 Awards - Nominations Open

FMA: FMA takes CLSAP NZ to court over alleged anti-laundering breaches

Westpac: Westpac to launch carbon footprint tracker

BNZ: BNZ launches banking support for domestic, economic abuse survivors

nib announced that it will offer members continued support in the form of their COVID-19 member and community support package. The support package will be offered until 30 September 2020 to ensure that members are able to maintain their health. cover.

“nib New Zealand (nib) today announced it will offer its COVID-19 member and community support package for an additional three months to make sure members continue to stay safe and healthy by maintaining their private health cover as New Zealand recovers from the pandemic.

nib Chief Executive Officer, Rob Hennin, said that while lockdown restrictions have eased and more healthcare services are now available, the COVID-19 pandemic will continue to have ongoing financial and health impacts on New Zealanders.

“We recognise many of our members have experienced financial uncertainty and additional stress during this difficult time, and we want them to be able to continue to prioritise their health and wellbeing,” Mr Hennin said.

“By extending our support package we hope this provides both our members and the community with additional support to assist them as we return to a new normal,” he added.”

nib is offering:

• Ability for eligible existing members who are experiencing financial hardship to access special premium relief*.

• Ability for eligible existing members who are experiencing financial hardship to suspend* their health insurance policy and premium payment for up to six months.

• Expanded coverage* for chest, lung, kidney and bladder or other treatment related to conditions caused by COVID-19 across all levels of hospital cover (including Basic Private Hospital Cover, Mid Private Hospital Cover and Mid Private Hospital Cover Plus where currently excluded) at no additional cost.

• Cover for GP or specialist consultations that need to be conducted via video or tele-consultation due to COVID-19*.

• Automatic increase of pre-approval validity to six months meaning members do not need to reapply for pre-approval if they experience delays to hospital treatment^#.

• Ability for existing members to increase their excess (payable upon hospital admission) to the maximum allowable level under their policy without needing to be re-underwritten if they choose to reduce their excess as their financial situation improves^{^}.

• Help for members navigating COVID-19 by publishing across our various channels (including nib.co.nz) information on their cover, how to minimise infection risk and related matters.

• A $1 million donation from nib foundation and nib to support charitable initiatives, including Lifeline Aotearoa and Clearhead, to assist the community across New Zealand and Australia during the pandemic.

• Offering up to two weeks paid special discretionary leave for all nib Group employees (permanent, fixed-term or casual) who are impacted by COVID-19.

In other news:

Financial Advice: Bring in the Experts – What’s next for FSLAA: An update from the FMA on progress and the path ahead

Financial Advice: Expressions of Interest to join the Association’s Certification Committee now open

CoFI: watch the select committee

Financial Advice New Zealand have compiled an easy to follow guide to hardship response of all major insurers and banks.  

COVID-19 hardship offerings by insurers

COVID-19 hardship offerings by banks

During the Financial Advice NZ webinar, Minster Faafoi spoke about his commitment to ensuring that the conduct bill progresses while also highlighting that he is conscious of the importance of having enough lead-in time. During the webinar, the Minister spoke of how the Government understands that commissions are a legitimate way of paying advisers and as a result, the Government isn’t seeking to ban commissions, instead is looking to end target-based incentives. 

“In a webinar with Financial Advice NZ, Faafoi acknowledged that concern and said he did not want the conduct regime to add another layer of complexity of regulation on top for advisers.

The bill in its current form also allows regulations to dictate remuneration structures, which some industry participants have expressed concern about.

Faafoi said Government recognised that commissions were a legitimate way of paying advisers for their “important work” because consumers were generally unwilling to pay for financial advice. He said the Government was aware that commission structures were the way the sector had operated for decades.

“It is not the Government’s intention to ban all commission.” Click here to read more

It would be a great relief to advisers and insurers if it could be clearly discerned from the Bill that the power to ban commissions is reserved. At present the definition of incentives in the law can be read as including all normal commission payments, which is unnerving when long-term decisions need to be made. 

In other news:

Suncorp: Kate Armstrong joins Suncorp’s NZ boards

Suncorp: Suncorp earmarks further NZ$2 million for hardship fund

FMA: Transitional licensing continues at a “steady rate” despite COVID-19 delays – FMA

AIA: AIA new business value slips 27% after coronavirus disruption