Everything You Need to Know About the New Zealand Financial Services Legislation Amendment Act

A short introduction to the FSLAA

The Financial Services Legislation Amendment Act (FSLAA) establishes a new regulatory regime for financial advice and financial advisers in New Zealand. It was passed into law on the 8th of April 2019. You’ll have around 9-months from now to get your affairs in order before the new regime will apply to your business.

The Financial Services Legislation Amendment Act introduces a package of changes to the regulation of financial advice in New Zealand. The act is an ‘amendment’, which means it forms an update to existing legislation. The best place for you to read the actual legislation is here.

There will be a number of changes to the industry due to the introduction of the FSLAA.

  1. adviser terminology will be simplified
  2. Product terminology will be simplified
  3. The definition of ‘financial advice’ will be clarified

One of the Government’s key objectives is to make financial advice easier to understand and access. Currently, one of the challenges faced by consumers is differentiating between different types of advisers and the advice being offered.

Removing Adviser Designations

Moving forward, the terms Registered Financial Adviser (RFA), Authorised Financial Adviser (AFA) and Qualifying Financial Entities (QFE) will be dropped. Clients often don’t know what these titles mean, or how they affect the type of advice they receive from a financial adviser. Removing these designations reinforces the government’s decision to hold all financial advisers to the same conduct and client care obligations, which should improve the general quality of advice being delivered in New Zealand.

Removing Product Categories

The distinction between ‘class advice’ and ‘personalised advice’ will be removed. The distinction between ‘category 1’ products i.e. investment advice, and ‘category 2’ products i.e. mortgage and general insurance will be removed. The purpose of the new legislation is to hold all financial advice to the same core standards.

Clarifying the definition of ‘Financial Advice’

There are a few new terms you’ll be hearing a lot about that are worth understanding.

A ‘financial advice provider’ is a person or company that provides a financial advice service.

A ‘financial advice service’ is the service of giving regulated financial advice.

Financial adviser’ means an individual (person) who is registered in relation to providing a financial advice service, but does not include a ‘financial advice provider’.

A ‘nominated representative’ means an individual who is nominated by a financial advice provider.

Are you giving regulated financial advice?

It’s important to know when you are deemed to be giving regulated financial advice. A person gives regulated financial advice if they…

“make a recommendation or gives an opinion about acquiring or disposing of (or not acquiring or disposing of) a financial advice product.”

Mortgage, Insurance, and KiwiSaver Advice clearly falls within this definition. There are exceptions to whether you are deemed to be giving financial advice. For example, the legislation may not apply if you are only providing services to wholesale clients, i.e. businesses.

Nominated Representatives

What is the difference between a financial adviser and a nominated representative?

Advice is provided by a financial advice provider who will use financial advisers, nominated representatives, or digital platforms to deliver the advice. While the responsibility for both lies with the financial advice provider, there is an expectation that the activities of nominated representatives will be more tightly controlled.

Banks and larger financial advice providers currently registered as QFEs are likely to use nominated representatives when delivering advice. Existing advice businesses are expected to deliver financial advice through financial advisers moving forward. There will be a much bigger burden on financial advice providers wishing to deliver advice through nominated representatives, most likely making it impractical and not particularly useful for mortgage and insurance advice businesses.  

Who is responsible for the advice being delivered?

The intent of the new legislation is to make it easier to determine who is responsible for the financial advice being delivered to consumers. Often employees will deliver advice on behalf of a business, which is not well covered through existing legislation. The new regime will apply to everyone delivering financial advice. This means the financial advice provider could be liable for a breach in the conduct of the advisers working on their behalf. You can read more about the new Code of Conduct standards here.

The Financial Services Provider’s Register (FSPR)

In order to provide financial advice to retail clients you will need to be registered under the Financial Service Providers (Registration & Dispute Resolution) Act 2008 (the FSP Act). This is known as the FSPR by advisers. Both financial advice providers and financial advisers will be required to be registered on the FSPR. Nominated representatives will not be required to be individually registered on the FSPR.

The FMA may also require interposed persons (authorised bodies) to register on the FSPR as a licence condition. An interposed person is an entity that engages financial advisers or nominated representatives, and provides regulated financial advice on behalf of a licensed financial advice provider.

Complying with your licence

In order to carry out the business of giving regulated financial advice, you must operate under a financial advice provider or be exempt from the licensing requirement. Mortgage and insurance advisers will need to be under a licensed financial advice provider, and are unlikely to fall under an exemption.

You will either need to hold your own licence, or be an authorised body on another financial advice provider’s licence. A licence authorises the provision of a financial advice service. If you are the licence holder there will need to be arrangements in place for you to control the provision of the advice referred to in the licence.

A licence will state which types of financial advice may, or may not be given on behalf of the licensee. Conditions of the provider’s licence may also limit the types of advice that may be given by financial advisers.

A person provides a financial advice service in one of two ways:

  1. By engaging others to give regulated financial advice to their clients on their behalf
  2. On their own accord to their own clients

In the regime, anyone who gives regulated financial advice to retail clients must be engaged by a financial advice provider who is licensed by the Financial Markets Authority.

The following Case Studies illustrate two different scenarios to show the difference between working under another’s licence, or holding your own. To learn more about if you should hold your own licence, read this article.

Case Study 1: Engaging others to give regulated financial advice on your behalf

Demo Advice Limited (Demo Advice) has one Shareholder/Director, Shelly, who is a financial adviser. She has one other financial adviser working for her, Jerry. He is a contractor to Demo Advice Business Limited, and earns a commission.

Demo Advice is a firm that gives a range of mortgage and insurance advice to its clients. Some of its advice is given through its employees, and some of its advice is given through articles and advice published on its website. Under the historical regime, Shelly and Jerry were registered financial advisers.

Demo Advice provides a financial advice service, and therefore must be either licensed or an authorised body falling under another company’s licence. Shelly, the director of Demo Advice, has elected to maintain her own licence to give her more independence and control over her business, systems, and advice process. The alternative would be for her to fall under another company’s licence as an authorised body, for example the licence held by her aggregator. If this was the case she would not need to licence her company individually.

Jerry is contracted by Demo Advice to give financial advice to the business’ clients on its behalf. While Jerry is giving advice, he is not giving it on his own account, so he is not deemed to be providing a financial advice service, and therefore does not need to hold his own licence or be an authorised body under a licence. He will be catered for under the financial advice provider licence held by Demo Advice.

Demo Advice is a financial advice provider and therefore required to be registered under the Financial Service Providers (Registration & Dispute Resolution) Act 2008 (the FSP Act). This is the equivalent of today’s financial service providers registrar.

Under the conditions of the licence held by Demo Advice, the type of advice given by Jerry may not be provided by a nominated representative. The mortgage and insurance advice he gives can only be given by a financial adviser. This means Jerry needs to be registered under the FSP Act in his own capacity, even though he is not in the business of providing financial advice services.

Jerry, as a financial adviser, gives advice on behalf of Demo Advice, who is a financial advice provider. Jerry is not civilly liable for a contravention under the new regime, but may still be subject to disciplinary action and suspension/deregistration should he break the law. The ultimate civil liability will sit with Demo Advice Business and its director Shelly.

Case Study 2: Providing advice on your own account

Jerry decides to leave Demo Advice Business and set up his own business giving financial advice on his own account. He is an independent adviser working alone under his new business Sharp Advice Limited.

Since Jerry is no longer contracted by Demo Advice Business, he would be deemed to be providing a financial advice service and would therefore be a financial advice provider who must hold a licence or be listed as an authorised body on the licence of his aggregator.

Sharp Advice provides a financial advice service, and therefore will need to be registered as a financial advice provider. Sharp Advice will also need to register on the FSPR.

As you can see, a change to the law has been designed to more clearly create responsibility for the financial advice being provided through licensing, regardless of whether you are a sole operator or an adviser with others working for you and your brand.


The changes caused by the FSLAA will restructure the way that advisers work to make receiving good advice easier to understand and access for consumers. These changes include:

  • Removing adviser designations
  • Removing product categories
  • Redefining ‘financial advice’ and the responsibilities related to that advice

There are steps that you will need to take to make sure that you are ready for when the new regime comes into effect. As an adviser, it’s important that you understand these changes and what they will mean for your business.