Offshore lead generator and referral fees
An adviser at a licensed financial advice provider (FAP) receives an email from a Singapore-based wealth portal. It offers leads of New Zealand expatriates and returning residents with at least NZ$100,000 to invest. The portal says it will provide warm introductions and high-level product ideas, but not personal financial advice. It wants a 1.2% referral fee, paid to an offshore account, for each client who invests within 90 days. The FAP's sales manager is enthusiastic and forwards a list of 12 leads, including a New Zealand resident who wants KiwiSaver advice. The portal has no New Zealand licence or registration. The adviser is asked to call the leads the same week. The adviser also notices the portal's privacy notice is a single sentence and that the referral fee would be paid before any client disclosure is sent.
1. What regulatory and conduct issues arise from using the offshore portal?
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The core issue is who is giving regulated financial advice in New Zealand. The portal can provide generic product ideas, but personal advice to New Zealand clients must come from an adviser authorised by a licensed financial advice provider and must meet the FMC Act and the Code of Professional Conduct. The adviser should not assume an offshore introducer label removes the need for licensing.
Other issues:
- Referral fee and conflict: a 1.2% fee creates an incentive to push clients into products within 90 days. It must be disclosed, approved under the FAP's conflicts policy and not distort advice.
- AML/CFT: the FAP must complete client due diligence, verify identity and source of funds; an offshore list does not satisfy this.
- Privacy and cross-border data: the one-sentence privacy notice is inadequate; sending lead data offshore raises Privacy Act obligations.
- Disclosure: clients must receive disclosure before or at the time advice is given, including fees and conflicts.
- Record keeping and supervision: calls and advice must be recorded and supervised.
Paying a fee to an offshore account before disclosure also creates a conduct and fraud-risk red flag.
2. What should the adviser do before contacting the leads?
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Escalate to compliance and the FAP's nominated supervisor before any contact. Do not pay the referral fee or send client data. Request the portal's due diligence: ownership, regulatory status, privacy policy, how leads were obtained, consent to share data, and complaints history. Obtain legal advice on whether the arrangement is a permitted referral or unlicensed advice.
For each lead, start normal onboarding: identity verification, AML/CFT risk assessment, disclosure of fees and conflicts, and a suitability process before any personalised recommendation. The KiwiSaver lead needs particular care because KiwiSaver advice is regulated and the client's existing scheme, contributions and retirement horizon matter. If the portal is not acceptable, decline the arrangement and document why. If it is approved, put a written agreement in place covering data, fees, client consent, advice boundaries and termination. The adviser should also check that the 90-day incentive does not cause rushed recommendations.