People seeking financial advice could face fewer choices under proposed changes to new adviser legislation, a financial advisory group has warned.
Commerce Minister Simon Power on Tuesday proposed changing the Financial Advisers Act and Financial Service Providers Act so that major financial institutions such as banks could include contractors aswell as employees under their status as a Qualifying Financial Entity (QFE).
That would mean contracting advisers would not have to be individually licensed and the entity would take full responsibility for any advice they give.
Lyn McMorran, president of the Institute of Financial Advisers, which includes both tied advisers and those not aligned to any financial institution, said the changes could encourage some advisers to become tied.
"It's a little bit of a concern whether that will encourage advisers that are non-aligned to suddenly swoop towards becoming aligned because it makes everything go away for them."
McMorran said that had the potential to limit consumer choice. An adviser who is tied or aligned to a particular institution will only sell that institution's products.
Murray Weatherston, chairman of the Society of Independent Financial Advisers, said many advisers were waiting to see what the costs and compliance levels were before deciding what to do.
But if they were too high or complicated Weatherston said he would seriously consider being tied to a QFE or leaving the industry entirely. He believed that could leave the public with less choice when it came to tailored advice.
McMorran said the new act was designed to boost consumer confidence but the changes did not appear to be in favour of that.
But Power said the amendments would still encourage public confidence in advisers.
Moves to tighten rules for financial advisers were fast-tracked last year after the collapse of the finance company industry.
The new legislation is expected to be introduced at the end of next year and will result in advisers either become registered under a QFE or individually as an authorised financial adviser by the Securities Commission.
Advisers will also have to meet a minimum qualification standard.
