300 financial advisers won't make the cut: FMA

Photo / Thinkstock

As many as 300 financial advisers could be out of business by Friday as tough new rules come into force making it an offence for unlicensed advisers to give advice on KiwiSaver, managed funds and other investment products, without proper qualifications.

The changes, which require all financial service providers to be on a public register, are designed to improve investor protection and increase confidence in New Zealand's capital markets.

Financial Markets Authority (FMA) director of financial adviser regulation Mel Hewitson said to date 1367 financial advisers have been authorised, with a further 150 applications due to be processed this week.

About 150 Christchurch-based financial advisers have given more time to comply with the Government's financial adviser regime, following the February earthquake.

However as many as 300 financial advisers have not completed testimonials and competency tests and would probably not meet the July 1 deadline, Hewitson said.

"We are pushing through them as fast as we can but we can't do people's exams for them."

A further 25 financial adviser's applications have been 'escalated' 'where there has been evidence of criminal convictions, complaints or disciplinary proceedings, or issues around testimonials'.

Decisions would be made on these applications shortly, Hewitson said.

Financial advisers have been able to apply to be authorised since last August and those did not make this week's deadline should be making alternative arrangements for their clients, Hewitson said.

The cost of getting authorised depended on each adviser's existing qualifications and could run into several thousand dollars, Hewitson said.

"Anecdotally we are aware of some advisers who are getting near the end of their careers and felt the effort and money was not worth it given the number of years they intended to keep practising," she said.

Hewitson said FMA would be doing spot checks on advisers who applied but did not make the deadline and would take action against any person falsely claiming to be an authorised financial adviser after July 1.

"This is the first step towards a regime that investors can have much greater confidence in and those AFAs should be well positioned to take advantage of that," she said.