Young JonathanJONATHAN YOUNG (National—New Plymouth): I'd like to as the chair of the Economic Development Science and Innovation Committee thank the Minister of Finance for his kind words for the hard-working committee as we deliberated on and considered this bill. The financial advice and services reform that was started by the previous Government followed the global financial crisis that incurred tremendous losses for people in New Zealand. I believe at the time there was around $9 billion that was lost. So the first regulatory regime for financial advice and financial service providers came into force in 2011 and there was in that original bill a statutory review of the existing regulatory regime to be completed in 2016 which was part of this whole process that brings us to this amendment bill the Financial Services Legislation Amendment Bill.There was industry and public consultation on the issues paper; an options paper released by the Ministry of Business Innovation and Employment; and following those rounds of consultation the National Government sought views on an exposure draft of the legislation.Sitting suspended from 6 p.m. to 7.30 p.m.ASSISTANT SPEAKER (Poto Williams): Members the House has resumed. Before the dinner break we were debating the second reading of the Financial Services Legislation Amendment Bill and Jonathan Young has eight minutes and 33 seconds remaining to speak should he wish to take it.JONATHAN YOUNG: Thank you Madam Assistant Speaker I certainly do.As the chair of the Economic Development Science and Innovation Committee I am pleased to come and report to the House on the work of the committee. We received 72 written submissions on the bill and quite a number of those submitters came and spoke to us.Just for some context and history this bill—or in fact the whole regulatory regime for financial advice and financial service providers came into force in 2011. This bill is based on a statutory review of the existing regulatory regime and that review was completed in 2016. Then Cabinet policy decisions were made on a new regime and in February-March 2017 consultation opened up on the draft bill. Then of course we had an election and coming back into the House the bill has come to the Economic Development Science and Innovation Committee. It would ordinarily go to the Commerce Committee.What the bill does it creates a new framework for giving financial advice by amending the Financial Markets Conduct Act 2013 and the Financial Service Providers (Registration and Dispute Resolution) Act 2008 and repealing the Financial Advisers Act 2008. Under the new regime financial advice providers being any person carrying on a business of giving financial advice will be required to be licensed by the Financial Markets Authority (FMA) to give advice to retail clients. Of course all of this came in to being because during the period of the global financial crisis many New Zealanders lost their life savings through poor advice that had been given to them and that amount has been estimated to be $9 billion. So we now have a regime which is robust and has gone under a period of review and now this bill comes back to the House.So as I said the committee received 72 written submissions. Twenty-eight were from financial service firms including small and large financial advice firms banks KiwiSaver funds insurance companies trustee companies and other financial service firms. Seventeen submissions were received from industry or professional bodies representing the interests of financial advisers financial service providers insurance companies etc. Included into that was chartered accountants retirement villages and even exercise facilities. Eight were from law firms seven from individual members of the public six were from individual financial advisers five were from consumer-interest groups or dispute resolution schemes and one was from the code working group that is developing the new code of conduct for financial advice. So you see there was quite a broad range of submitters that came to the committee. The committee heard the submitters here in Wellington and also in Auckland.The review found problems with the current regulation of financial advice. The review found problems with the misuse of the Financial Service Providers Register and there were some key amendments proposed in the bill. They included removing the requirement that only a natural person can give financial advice which allows for provision of online advice. People can go to a website of a financial institution they can put in their data—confidential of course—and there can be assessments made around their data and they can receive advice from that data often called robo-advice.Expanding the minimum standards of competence knowledge and skill to all categories of people giving financial advice to retail clients was a very important part of the bill and certainly having a customer-centred piece of legislation is absolutely critical and this bill strengthens that. So requiring all people who give regulated financial advice to comply with standards of ethical behaviour conduct and client care is very much part of this adding a requirement that anyone who gives financial advice must put the interests of the client first and disclose prescribed information. It limits who can give regulated financial advice. It simplifies the regime and its terminology for example by removing the categories of authorised financial adviser" "registered financial advisers" and "qualifying financial entities". It amends the requirements to be registered on the New Zealand Financial Service Providers Register to prevent its misuse.The bill defines "financial advice" as making a recommendation about financial products or designing an investment plan. Of course New Zealanders all over this country seek that advice. They want to prepare for their future and they want to have advice that will give them confidence and surety in that future the best advice possible. Of course many people as we learnt very early on in the piece that took wrong financial advice during the financial crisis that took place lost the opportunity of not only being able to invest their money but being able to earn money again and so they're incredibly vulnerable.One of the most common types of financial advice relates to switching KiwiSaver funds. We noted that a decision to switch between funds within the same managed investment scheme is technically not a renewal or variation of the terms or conditions on an existing financial advice product. Therefore providing advice on switching funds could be excluded from the regime. We consider that the regime should apply to advice on switching funds within KiwiSaver or other managed investment schemes.In clause 27 new section 431J(2) of the Financial Markets Conduct Act would impose a duty on financial advice providers to take all reasonable steps to put the client's interests first. We understand that this is to stop advisers from recommending one product that might advance their own interest—for example by earning them a commission—over another that would better serve the client's interest a matter that has been discussed a number of times prior to this bill coming to this House and the committee.We looked at the conduct of nominated representatives. The scope of advice that could be offered by nominated representatives should be limited. The intent of the bill is that financial advice providers should ultimately be responsible for the conduct of their nominated representatives. Therefore the activities of a nominated representative should be tightly controlled by the processes and systems of the provider.We looked at exclusions from regulated financial advice particularly for lawyers and accountants who in the normal course of their business may give some degree of advice to their clients. We recognise that normal legal and accounting advice may sometimes technically fall under the bill's definition of what financial advice is. However we consider that lawyers and accountants should not be burdened with additional regulatory controls in the course of their ordinary business or occupation. Existing regulatory frameworks for the legal and accounting professions should suffice. We therefore consider the exclusion necessary to avoid unnecessary compliance requirements and of course costs which are passed to the clients.I am very pleased to support this bill to the House. Thank you."