Industry shake-up threat to personal financial advisers

Participants in the financial services sector need to "wake up and smell the coffee" and get to grips with a proposed shakeup of the industry that may force some personal financial advisers out of business, says a member of the group recommending the changes.

The Ministry of Economic Development's Financial Intermediaries Task Force in August released a report containing a series of proposals focused on tightening industry regulations.

Industry groups said requirements for higher standards might see some experienced and capable personal financial advisers forced out for lack of academic or professional qualifications.

Task force member Ross Kent told a New Zealand Insurance Law Association conference last week in Wellington that while implementation of the changes was not likely until 2008, "that implies full steam ahead from here".

Kent said those that felt the 2008 target implied the industry could take a leisurely approach to the reforms, "really need to wake up and smell the coffee".

"If you aren't already busting an artery to get your head around what this might mean for your business ... you'd better find out quick," said Kent, who is also general manager of Alliance Capital Management.

"My interaction with officials since the report was published gives me every confidence that they are extremely interested in pursuing this quickly."

There would likely be some draft legislation to look at as soon as Christmas and the industry would have a chance to feed into that for another six months, he said.

The Financial Intermediaries Task Force was launched last year by then Commerce Minister Margaret Wilson after the International Monetary Fund raised concerns about the state of financial regulation here.

It was charged with coming up with options for reform that would help people make the most of their savings and enhance the quality of financial information and advice.

It focused on financial advisers and marketers who provide financial advice, or who market and promote financial services to the public.

The task force's key recommendations included:

* Higher standards for personal financial advisers for which the industry would have input.

* A requirement that advisers belong to an approved professional body.

* The professional body would oversee the industry in partnership with a state regulator - likely to be the Securities Commission.

The taskforce also recommended giving consumers easy access to dispute resolution facilities and improve financial literacy education and information.