Financial Advice Provider Monitoring Insights

Findings from the FMA’s supervision activities and monitoring of Class 1 and 2 licensed financial advice providers.

Foreword from Michael Hewes, FMA Director Deposit Taking, Insurance and Advice 

The financial advice sector has the most diverse range of businesses among the sectors licensed and monitored by the Financial Markets Authority – Te Mana Tātai Hokohoko (FMA). Advisers are spread throughout the country, operating from home offices through to large corporates. Financial advice plays a critical role in helping New Zealanders get ahead by building and protecting their retirement savings, investments, homes, families, and overall financial wellbeing.  

The road to the new regime included a transitional licence period, delays and challenges related to COVID-19 lockdowns, severe weather-related emergencies, and rising household costs. Throughout this, the financial advice sector was resilient and continued to progress towards embedding the requirements of the new regime.  

The insights in this report tell us that financial advice providers (FAPs) and financial advisers have made progress and have successfully transitioned to the new requirements. This is seen in the good practices we have highlighted. We have seen FAPs using the new requirements to further serve the needs of their clients and build stronger and more resilient businesses.   

We have also identified gaps that, if they remain unchecked, could escalate into poor outcomes for clients. In some instances, the root cause of these gaps is complacency, where the FAP has taken a ‘tick-box’ approach to compliance instead of making an effort to fully understand the purpose of the new obligations.   

Where we identified serious client harm resulting from non-compliance, we have taken, and will continue to take, action proportionate to the level of misconduct, including intensive supervision and formal regulatory action where appropriate.  

As the regime matures, we expect entities’ understanding of their regulatory obligations to mature and be reflected in their practices. Our approach to supervision will strongly reflect this expectation.  

FAPs need to align with the overarching objective to serve the needs of clients and invest the effort and time to ensure their arrangements are fit to achieve this.  

To date, we have only reviewed a portion of the sector. While this report isn’t intended to conclude on the sector as a whole, we believe everyone can learn from these insights. We are sharing them now, early in the regime, to help FAPs and financial advisers assess and improve their operations while the requirements of the new regime are still being fully embedded. 

We intend to maintain strong and open relationships with the sector and work collaboratively to deliver on the purpose of the new financial advice regime, which is to enable greater access to quality advice. 

Download the Financial Advice Provider Monitoring Insights report [PDF], 2.5MB