A Chapter Closes and the End of an Era Approaches
The final stages of two historic sagas are approaching – one story began recently and another not so recently.
First, the final chapter of the legislative review of financial services is about to be signed off in Parliament with the enactment of the much-discussed FSLAB to follow, likely before the end of the year. Once this becomes law, the Financial Advisers Act 2008 will be repealed, and the amended Financial Markets Conduct Act will become the governing legislation.
Over the review period there has been much debate and much interaction and the result, while disappointing in some respects, is better than the previous Act.
The Big End of Town won the battle to disenfranchise consumers by concealing the fundamental distinction between product sales operatives (working on behalf of their employer) and professional financial advisers (working on behalf of their client).
On the other hand, the constant lobby and representations around the ill-considered Category 1/ Category 2 product delineation, and the resultant RFA/AFA confusion was considered and these aspects of the FAA consigned to the rubbish bin.
These were artificial distinctions of little substance, while the aforementioned lack of demarcation between product-selling disguised as advice and genuine financial advice has enormous consequences for consumers – reference the Hayne Commission in Melbourne.
The Bill was also amended to facilitate the hiring of new entrants to the industry without the need for them to be classified as Financial Advisers at the outset.
Of course, we await the deliberations of the Code Working Group, but to all intents and purposes, the legislative debate is done and dusted and the chapter is rapidly approaching the end.
In my view, the process of consultation and debate has extended the understanding among the various stakeholders of each other’s pressures, responsibilities, and priorities. That’s not to say, we all know everyone else’s business, but we know more now than we did at the start of the review process, and I suggest that extending and continuing these collaborative relationships will be instrumental in avoiding a repeat of the debacle playing out currently in the Royal Commission in Melbourne.
Living and working in a democratic market economy requires compromise and consensus. The interests of product providers, financial advisers, and regulators are not identical, but we need to find common ground where those interest can converge, overlap, and create better, more effective outcomes for consumers.
The Stakeholders Engagement Group (SEG) met on a number of occasions with representatives of, as the name suggests, interested parties discussing various aspect of legislation and regulation during the review process. Now that the chapter is drawing to a close, I suggest that whenever convenient and all stakeholders are available, this body is more formally constituted to identify means of effective and inclusive implementation of our collective and shared obligations.
Second, coming up for 30 years ago in December, Chris Coon, Ian Hendry, Ernie Uganecz, Don Jeffries, Naomi Ballantyne and yours truly stood around in various configurations in a photographic studio in Newmarket, Auckland, posing for Sovereign’s first ever publicity brochure.
Much water has passed under many bridges since those early days, and with the recent AIA acquisition, the Sovereign brand will shortly pass into the history books.
At the resoundingly successful Financial Services Council (FSC) National Conference last week, Naomi and I shared a moment of nostalgic memory, acknowledging that the end of an era was approaching.
Those were heady days indeed – from having to seek permission from the Crown to use the name Sovereign (true!) to the ‘cease and desist’ order from the Securities Commission (ably rebuffed), and many other watershed moments that forever changed the face of the New Zealand financial services industry.
However, looking in the rear-view mirror is but a transient experience and having worked at senior management level in both Sovereign and AIA, I can confidently predict that there are some interesting times ahead!
So, while the legislative/regulatory chapter is almost written, the next chapter needs to be planned, structured, and developed and the delivery of the legislative and regulatory obligations of all stakeholders will commence.
And in Sovereign’s case, while the sun is setting on one era, another era is about to see the sunrise.
We live in interesting times!