Financial Services Legislation Amendment Bill – Second Reading – Video 7

Financial Services Legislation Amendment Bill – Second Reading – Video 7

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to take advantage of the debating chamber and its fullness and encourage members not to read these speeches our corporate Hudson thank you very much bigger I hope you weren’t anticipating my contribution with those comments but suppose it arise and speak in support of the financial services legislation amendment bill I think it’s important we do consider that as this has exited Select Committee why we as a parliament would look to not only introduce but potentially pass legislation that does a great deal to regulate the behaviors of a particular part of the market the financial services part of the market of course it’s well within living memory to remember the global financial crisis and the implications that had not just that a macro level on countries economies but if we look at the heart of it madam Speaker a lot of the stimulatory activities a lot of the bailout activities that happen around the world and including New Zealand we’re not just to protect an institution certainly or a system but at the heart of that it was about protecting what the member who just resumed her seat referred to as the mum-and-pop investors the people who had taken what they had and what they had wasn’t necessarily a great deal and it looked to invest it in in reasonable return areas and found themselves compromised when something that was akin and least in parts to a house of cards collapsed and that actually brings to the heart madam Speaker why we should have regulation and legislation like this because financial services as an area perhaps greater than many if not most where there is an information asymmetry in the transactions that take part that is the people the people that offer the services or sell the products and services have a great deal more knowledge and in-depth knowledge of not only what they are selling but what backs it up then the consumers or the purchases of those products and services so they’re in a natural position to potentially take advantage explicitly or simply to through in action if not direct action to encourage people down a line of investment that if they had the the benefit of the same level of understanding that they may not take so when we’re having a market information asymmetry it is a natural place for Parliament to consider either primary legislation or regulation or both to help to address that to mitigate what could be very very negative consequences for consumers and indeed when enough consumers are affected the market as a whole so I’m delighted that what has come out of the Select Committee is recommending some very sensible additions to make sure that there are minimum standards of competence and knowledge within the industry but there are also standards of ethical behavior and the nature of advice and the responsibilities that come with giving advice it means that our our New Zealanders and our markets can have greater confidence that the fundamentals the foundations of our financial markets financial services markets on a stronger and more solid foundation I noted my colleague mr. goldsmith the Honorable Paul Goldsmith made a point about he was talking when I walked in at least about people getting their information today on acts and new new ways of interacting with with service providers and it is pleasing to see that one of the changes recommended from the committee is that a prohibition that only a natural prohibition on non natural persons offering financial advice has been recommended to be lifted now at a very simple level people call that Robo advice but I think as technology continues to mature and something we’ve heard quite a bit about over the last couple of years as artificial intelligence so Robo advice is not gonna no longer going to be what might have been thought in the first instance is where you ring up a telephone number and machine answers press one for this and suddenly you get some basic or slightly than absolutely basic advice that most people would understand robos because they’ve some of them even been subjected to inbound robo calls but this is a bit broader than them because what sits behind that advice is actually how what is the program and what is the decision-making how is that advice constructed and offered and we will see artificial intelligence have a far greater role to play particularly when that institution knows the person that calls them particularly if they are an existing client and they have a great deal of information on their position and their current investments and actually that is a good thing madam Speaker it is a good thing if it’s used well because a any company and in this case a financial services company can offer enormous value to their clients if they take what they know about them what they know about products and services what they know about markets what they know about other investors they can tailor advice to them that is beyond the absolute basic and can be of greater future value to that client but if it’s done poorly it could also result in if not harm financial harm to that client certainly a sub optimal outcome so I’m very pleased that there is a recommendation to remove that restriction and to allow our Robo advice which will lead to so many opportunities in the future I am particularly happy particularly pleased about the provisions around a duty of care a duty priority to their clients interests any business madam speaker whether they’re financial services or not if they have a vision of a long-term successful future for their business and their shareholders should be placing their clients interests ahead of all else because ultimately it is their client remaining with that business or coming to return business that leads to their greatest success so it’s pleasing to see that the legislation enshrines that duty of care to to the advisers I’m also pleased along with it that there are good strong elements of pragmatism to it a recognition for instance that no matter who the financial advisor is they can’t possibly know every single product or service that might be available on the planet and particularly although there is some contention within the industry it does permit that some institutions such as banks that will only ever offer products that are their own are able to do so and not contravene the the act as long as they make that disclosure upfront but I would note that that is not without some controversy in the industry the smaller or more independent financial service advisors that have spoken to me have certainly raised this issue that that means that there is less control or less oversight on on what some of those things those those larger institutions might be but I think it is unbalanced we’ve got it absolutely right not even close to right but absolutely right also the exclusions from regulated financial advice I had a wry smile as I read through particularly schedule five of this bill madam Speaker because it on the face of it if you didn’t sit in the committee and I didn’t I attained this spokesperson role for Commerce and Consumer Affairs when the evidence were already out a way for this bill but it looks like almost every profession in person you can imagine is actually excluded from giving financial advice and breve as a huge sigh of relief that members of parliament are included and those exclusions are feel free to talk to people about what you wish but it is right that we make some genuine effort to ensure that the law that will cover our financial advice and regulated financial advice is targeting the right people the right businesses the right sort of services in the marketplace and not through it through an unintended consequence affecting a broad swathe of others one of the loans I was pleased to see madam Speaker is that journalists are excluded they do not offer financial advice so for instance if I was to ask mr. Richard Hamid if it would be a good idea for me to put a bid on this government not in three years he wouldn’t be at risk of being subject to regulation under this financial services legislative amendment bill so i would i would encourage mr. harmon to give me that the good oil and what i what actually is going to happen because i think he here’s a bit of insight there the last part i’d like to talk about and in do things that bring governments down for instance i win their own back benches don’t have confidence in the prime minister and it’s quite shocking here is it if you don’t have confidence in your prime minister how can the country have confidence in it the other thing madam Speaker and I’d say that a practitioner came to speak to me about this it’s very important the legislative legislation we make doesn’t turn off legitimate opportunities for New Zealand businesses we have the ability to offer high quality high integrity financial services as an export to the cut to that to the rest of the world and we shouldn’t have legislation in place that prevents it I’m very pleased to see that officials recommended a change that means that if you’re a New Zealand exporter financial services and you don’t have New Zealand clients you can still get on the registered which was pleasing to see so overall madam Speaker I will commune this bill to the house call Gareth use Kurata madam speaking there me

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