Guidance on financial planning, advice

Guidance on boundary between financial planning and advice

The Securities Commission has issued guidance for the financial advice sector on the boundary between financial a planning service and financial advice. This will help advisers prepare to meet the requirements of the Financial Advisers Act when it comes into force, says Commissioner for Financial Advisers, David Mayhew.

The Act requires advisers providing a financial planning service to be authorised by the Commission, whereas those advising only on a narrow range of financial products, such as bank term deposits, credit card and most insurance products (‘category 2 products’) will need to be registered but not authorised.

“The Commission is responding to industry concerns about the intersection of the work required when giving financial advice with that required by a financial planning service as defined by the Act. We want to clarify the boundary between a financial planning service and advice on category 2 products and where this sits in the context of advisers’ obligations,” says Mr Mayhew.

“It is important advisers recognise the limits of their own capabilities and act in the interest of their clients. It would be unacceptable for unauthorised advisers to deliberately restrict their inquiries, and the standard of care, diligence and skill the giving of advice demands, just to avoid being seen to provide a financial planning service.

“If advisers think their business model might involve stepping over the category 2 boundary and into financial planning, it is best for them to seek authorisation from the Commission.”

The guidance note is available on the Commission’s website www.seccom.govt.nz

ENDS

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