Power Simon: Financial Advisers Bill — First Reading 
Power Simon: Financial Advisers Bill — First Reading 
[Volume:645;Page:14346] 
SIMON POWER (National—Rangitikei) 
: 
 I thank the Minister for outlining her faith and confidence in the select committee process in looking at some of the issues the National Party views as remaining outstanding or at the very least requiring a further look and perhaps some drafting amendments and tightening on some particular definitions. But we will come to that shortly. 
I take this opportunity to thank the Minister for involving the National Party in initial discussions with officials present about the process she undertook on behalf of the Government in respect of the Financial Service Providers (Registration and Dispute Resolution) Bill and the ongoing discussions around wider reviews and subsequent legislation coming from those reviews. I think it is worth making the point that the Minister if I heard her correctly is talking about a report-back date of 20 June for the Financial Advisers Bill. The Financial Service Providers (Registration and Dispute Resolution) Bill has a report-back date of about 10 June the last time I looked at that particular set-up. 
In National’s view hearing a submission that could be relevant to both those bills at the same time is a significant advantage for the industry. I would encourage those who feel as though they have a stake in this legislation to have a say at the select committee. I encourage not just those in the industry but also consumers and those who are taking the opportunity to look very carefully at the type of investment decisions they are presently making with the unfortunate collapse in recent months of various organisations that could be described as second-tier lending institutions. This is an opportunity for those people also to have a say at the select committee and to put forward suggestions about what types of protections they believe should be available to investors. 
I know the Minister is fond of using in her speeches and releases the phrase “Governments cannot legislate for risk.” and I happen to share that view. Having said that I think there are more things that this Parliament can do to protect investors who are making decisions along these lines. The bill as proposed will need close scrutiny by the select committee. I am still of the view that the definition of “advice” contained in clause 6 provides a wide open door in some circumstances. I have looked carefully at clause 6(2) the “for the avoidance of doubt” clause and my initial reading of it is that it does not avoid that doubt. I think there is still room for improvement there because clause 6(2) states: “For the avoidance of doubt the provision of information whether orally or in writing is not advice unless it is accompanied by a recommendation an opinion or guidance.” That does not go anywhere near to clarifying the issues that I know the Minister has been looking at very carefully over the last couple of months. 
The Minister’s view that the select committee should spend time looking closely at those clauses specifically indicates to me that she is open to the suggestion that that drafting can be tidied up. In fact with all the concerns that have been raised about the definition of “financial advice” and “financial advisers” over the course of the last 2 to 3 months I have to say I do not think that gets us to where we need to be in order to exclude the so-called bank teller example or for that matter a real estate advertisement that gives an indication that a particular rental property today is returning 6 percent on the investment. In my view the “avoidance of doubt” clause would not preclude either of those examples at first glance. However I am sure the select committee will test that further. 
Indeed the definition of “financial advice” in clause 6 does not help us either. Clause 6(4) states: “Whether advice is financial advice or not is not affected by—(a) how the advice is given or communicated;” whereas clause 6(2) states: “For the avoidance of doubt the provision of information whether orally or in writing is not advice unless it is accompanied by a recommendation an opinion or guidance.” I think there is still quite a lot of work to do in marrying up those particular clauses so that we get a better net capturing some of those more tricky examples we have talked about. In fact I think that in an effort to clarify those definitions tightly by inserting those catch-all clauses we may find that we might have added to the confusion rather than clarified the specific nature of the advice that the Minister was looking to capture. 
I think too that we still have some questions to answer—as the Minister herself pointed out—around the issue of approved professional bodies. There is a really interesting question as to whether a pyramid-shaped regulatory framework should exist for financial advisers—with the Securities Commission at the top of the pyramid followed by a few or several approved professional bodies and the consumer at the bottom—or whether we should have just a linear framework that has the Securities Commission one approved body and then a range of financial advisers being captured by a regulatory framework such as this legislation. If the select committee were to adopt that model of course we would want to avoid—and I am sure the Minister would agree with me on this—one approved professional body capturing a monopoly and driving up commissions and the like on those investors. That I think will be an important discussion that we will need to have. 
Central to this particular legislation is the issue of disclosures of fees and commissions—something that will need a pretty close look as we work our way through these particular pieces of legislation. I think we also need to think a bit—and I know the Minister has made many comments in speeches and in press releases about the kind of educative nature that some of these bodies need to take up—to ensure that we are not simply upgrading the size of the disclosure document that is dumped on the investor but rather are taking the opportunity to make sure that crucial advice is covered and that the information that is passed to the investor prior to the decision being made or at the point that the decision is being made is clear and concise and can be understood. That is I guess the vocational imbalance that might exist between the adviser who has access to the information and the investor who is making that decision to put in monies. 
I think we should look at other international models for this regulatory framework. Hong Kong is a good example. It operates a much more stringent licensing regime. I think it is worth the select committee asking whether that model is achieving a different outcome from the one proposed and whether there is anything we can learn from the way those models have worked that we might be able to import into some of this legislation—again without wanting to crack a nut with a sledgehammer as the Minister says. This is a bit of a once-in-a-lifetime opportunity to have a good look at these particular regimes. 
I understand the reasons for the Minister sending the legislation to the Finance and Expenditure Committee although I think it is a shame that it is not coming to the Commerce Committee where no doubt we would give it equal weight and due consideration. None the less National will be ably represented on that committee as this bill passes through and I will continue to keep a close eye on its progress. 
The National Party will be supporting the first reading of this bill and its referral to the select committee on the terms sought by the Minister. We remain concerned about those aspects I have raised today—that is definitions around “advice” and “financial advisers” the role or proliferation of approved professional bodies and issues of fees disclosures and disclosures of commissions. We also take the opportunity to encourage comparison with international models and most important we say to people who invest in finance companies that this is their opportunity to have a say as much as it is the industry’s opportunity to have a view on the legislation that will go before the committee. 
Sitting suspended from 6 p.m. to 7.30 p.m.