I see the next step being how we can continue that spirit of collaboration and cooperation to deliver on the promise of those financial advice changes, remembering the purpose of legislation is to enable greater access to quality advice. This aligns with my own vision for the FMA, to see more New Zealanders than ever experience a financial sector that is working well for them.
There is now a huge opportunity for financial advice businesses, big and small, to help New Zealanders get ahead and build and protect their retirement savings, investments, their homes and loans, and overall financial well-being. Underpinning good outcomes and decisions on financial services is quality financial advice.
It’s fair to say the industry – and especially financial advisers – have been up against adversity and upheaval for a number of years with the COVID pandemic followed by catastrophic, climate-related events, and the increased cost of living making business for you, and life for your clients, incredibly unsettling. Added to these external shocks is the backdrop of economic, social, and geopolitical upheaval we continue to face from global events, along with economic headwinds at home – we can see you navigating this uncertainty in the environment as best as you can.
Through all this, advice continues to play a critical role in helping people manage their affairs and make well-informed decisions. You are an essential ingredient to our mutual and shared goal of a resilient financial services sector where customers and clients are treated fairly and with integrity. So, in reality, this uncertainty is part of the opportunity.
We’ve seen in recent upheavals that advisers are often first to help customers and clients in their time of need. This was particularly evident to me when I visited Hawkes Bay following Cyclone Gabrielle last year. I saw up close, and heard, numerous stories of how advisers went above and beyond to support their clients at a critical time. It is heartening to see the trust and commitment to help clients through devastating circumstances.
In this brief introduction, I also wanted to comment on the positive breadth of the opportunity ahead of you and us. As a sector within financial services, advice holds the largest number and most diverse range of providers across all the sectors we regulate. This diversity in scale and reach, whether small and locally oriented or large and nationally active, is your strength in facing the interesting and unique dynamics of our market. The size of the sometimes-called private wealth market is significant, estimated at around $40 billion FUM. In the broader market, over the last ten years, KiwiSaver has grown from $20 billion to over $100 billion dollars under management, with more than two and half million investors over 18-years-old. This is an enormous opportunity in itself.
But along with this growth has arrived a more attentive, and we hope emerging maturity around investment attitudes more broadly. An appetite for more growth-type investments in KiwiSaver, particularly among the younger demographic, has happened at the same time a generation has entered self-directed share investing.
We are definitely seeing greater participation in our financial markets, and this is not only encouraging but a core part of our mandate. These appetites and behaviours need support, and especially, quality financial advice to nurture the well-informed financial decisions we all want to see.
Insurance plays an incredibly important role in protecting well-being and financial security. There are still large segments of Aotearoa NZ underinsured. For those that are, they are facing increasing complexity in the way products work and the risks that are weighing on their policies, be it health, life insurance, or home and general, as climate impacts start to bite. This is where your advice and guidance come to the fore – as a trusted partner.
New generations of clients and customers are finding information and referrals from a wide variety of sources that are not necessarily proper, regulated advice – a good example being the rise of finfluencers. There are further opportunities through innovations in fintech to make advice and supporting your clients more accessible, engaging, and professional. We are conscious of keeping up with – enabling – fintech developments. That’s why we took a strong stand on introducing Robo advice in advance of the FSLAA changes, to encourage uptake of innovative technology that could support your businesses to help your clients and customers.
We can also see the longer-term emergence of a more hybrid model, where the benefits of AI and automation are blended with the human lens and the value of relationships and understanding of clients’ aspirations and situations.
In the last few weeks, the Minister of Commerce and Consumer Affairs has committed to transferring the Commerce Commission’s regulatory role to monitor and enforce lenders’ compliance with the Credit Contracts and Consumer Finance Act (CCCFA) to the Financial Markets Authority.
We are in discussions with the Minister to determine the next steps.
These proposals are likely to reinforce the growing relationships we want to foster and encourage with mortgage advisers, many of whom are relatively new to the licensed regulatory tent.
We’ve made strides recently on our transition to an outcomes-focused approach to regulation and engagement with firms. Part of this will mean finding out how best we can make sure our work with you is the most meaningful to support your focus on how to deliver best outcomes for clients. I feel there is already a strong alignment with the principles and values established in the Advisers’ Code of Conduct, the overarching principles and purpose of the FMCA and the outcomes we have consulted on for markets and consumers, including your clients. The code is a great example of a simple set of clear expectations.
We’re well aware of the rate of change that financial advisers have experienced; we want to manage this with you and focus now on embedding the opportunities in the new regime. It is worth noting that advisers have been at the forefront of the introduction of conduct regulation in New Zealand, and our dealings with you show that you well-understand the importance of confidence and trust in your industry, in order that you can thrive. So, our commitment to you is to intensify our collaborative approach under Outcomes Focus Regulation, and ensure compliance is proportionate and appropriate to the scale and size of your business.
While Outcomes Focused Regulation represents a step change for us in the way we approach engagement and regulatory efforts, some of our core regulatory practise and functions will remain evergreen and consistent.
We know the industry wants us to hold bad conduct to account and weed out poor practice, or indeed the bad apples that can appear in any industry. That’s our job and you’ve seen us active in that space. We will continue to maintain a credible deterrence focus to ensure we are promoting confidence and trust in your sector.
You also want to know and see, both what is working well, and where we’ve seen room for improvement, based on our interactions with the sector. Over the next few months, we’ll publish the outcomes of our monitoring activity. We’ll be reflecting these insights back to you, the good practice, along with the bad. Expect to see something public on this, later this year.
Conclusion – Our priorities now are to ensure that new regimes are bedding in well for industry and consumers. We’ll also be working with Government to support their proposals to streamline regulations in our sector and ensure the Twin Peaks model is working well.
I’d like to finish by returning to my message at the top. We can now focus on delivering the promise of the new advice regime, where more people are able to access well-regulated, quality advice. We will look to working together efficiently and effectively to build more trust and confidence in a financial advice sector that is working well for all New Zealanders.
