Power Simon: Financial Advisers Bill — Second Reading In Committee Third Reading 
Text is incorporated into the Bound Volume 
Power Simon: Financial Advisers Bill — Second Reading In Committee Third Reading 
[Sitting date: 23 September 2008. Volume:650;Page:18992. Text is incorporated into the Bound Volume.] 
SIMON POWER (National—Rangitikei) 
: 
 The Financial Advisers Bill has enjoyed support from the entire House from its first reading and through the select committee process in the Finance and Expenditure Committee its second reading and the Committee of the whole House and I suggest that that support will continue for its third reading. That tells us as a Parliament that the House regards this issue as being in many respects above the usual day-to-day political discourse that occurs on most of the legislation before it. Many many New Zealanders have lost money through finance company and mortgage trust collapses. Many billions of dollars have been lost because of those failures. It is critical to rebuild trust and confidence in our capital markets. The issue of the disclosure of fees and remuneration contained in this legislation is a key part of reforming the sector.  
I echo the Minister’s views when I say that many investors have received poor-quality financial advice. We in the National Party agree that there is a need to update the legislation that governs the activities of financial advisers and since the time when the Leader of the Opposition John Key wrote to the Prime Minister offering the assistance of the National Opposition with that process the issue largely became a depoliticised process. I was dispatched on behalf of the National Party to be briefed by the Minister’s advisers to discuss and negotiate with the Minister and to cajole her into accepting the differing views on the initial version of the bill. I will return to that matter shortly. 
One of the things that the Minister of Commerce and I and in fact that Labour and National agreed on very early was that it is impossible to eliminate risk from financial decision-making and indeed that it is impossible to legislate against such risk. So a balance had to be struck between minimising the risks for investors and minimising the costs of a new regulatory regime for investors. Of course legislation is not the only response to minimising the risks of financial investment. Improved financial education and literacy need to be part of improving New Zealand’s investment culture. Fundamentally the proposals in this legislation to require greater disclosure of financial advisers’ remuneration commissions royalties and other such payments greater disclosure of qualifications and conflicts of interest and a higher level of competency on the part of financial advisers are necessary. So too is the need to hold financial advisers accountable for the advice they give.  
This bill very appropriately in our view establishes the Securities Commission as the sole regulator of financial advisers and abandons the original co-regulatory model. It allows institutions to be accredited and responsible for their employees rather than in many instances requiring all individual employees to register. The two-tier regime which provides heavier obligations for more complex advice and lesser obligations for more simplistic products makes sense and is practical.  
On the issue of the financial adviser the definition of that term has been covered extensively during the Committee stage. There was no doubt that the attempt in the original bill to define advice given by referring to the occupation of the individual or the organisation giving that advice was based on a faulty premise not because that was not a good place to start the discussion about what a regime should look like but because it provided too many loopholes for people to avoid the regulatory framework. Indeed on the other hand it would have captured in our view—and in fairness to the Government in its view as well—a group of advisers who were never intended to be caught by a more complex regulatory regime rather than a more simplistic regime relating to more straightforward financial products.  
During the select committee hearings we saw the emergence of a model that virtually developed itself as submitters gave their views to the Finance and Expenditure Committee. It was actually quite a remarkable discussion with members of the committee putting alternative models to submitters as the submitters appeared and asking for their comment on the workability and practicability of those models. As those discussions went on it became clear that they were forming up in the minds of the committee and of the chair Charles Chauvel a useful model to explore beyond the model first offered at the bill’s introduction and first reading. To the credit of the officials who were advising the committee they swallowed hard and started effectively from scratch to draft the legislation that is now before the House in its third reading.  
During the second reading debate I said that parliamentary counsel made a remark in the drafting stages when I asked how much of the original bill would stay intact—my recollection was that the answer was three clauses. We later found out that it was two clauses and there was a suggestion during the Committee stage that it was only one clause. That meant there was a buy-in by the committee and by the Minister who corresponded with the committee on at least one occasion that I can recall offering to buy into that model and offering some suggestions about how it could work in a more practical way. I have to say the bulk of the work and if I can reuse the word I used in the Committee stage the elegance of the legislation that was put before us was largely a burden that had to be shouldered by the officials who advised the committee on that matter. They are to be commended for and congratulated on those efforts.  
I conclude by thanking the Minister of Commerce for making the officials available and for discussing this legislation in a positive and constructive way. I think in the end the House has delivered legislation that will begin this process in a comprehensive and thorough way.  
I will finish by saying one thing—and the Minister will be relieved to know that I am the only National Party member who is taking a call in the third reading—which is that this legislation in itself will not prevent people from losing money when they make investments. That is a very trite thing to say but it is an important statement to make because whatever happens after the election on 8 November and whoever occupies the Government benches will not change the situation that some people will lose money on various investment vehicles. All that the Government or for that matter Parliament can do is to provide a regulatory and legislative framework that is designed to put the best possible information before investors and to ensure that those people who are in the investment advisory business are competent and are required to disclose matters material to the investment decisions that are being made. The legislation cannot prevent loss and it cannot prevent risk but it does go some way towards requiring those who are giving financial advice to meet a far higher standard than that they have had to meet up until now.