MR No. 2015 – 53
17 November 2015
The Financial Markets Authority (FMA) today publishes its first monitoring report on practices in sales and advice within New Zealand’s financial services sector.
The report covers sales and advice practices within the main financial services providers, including the three types of professional advisers (authorised, registered, and QFE advisers).
It includes practices for category one products, these are more complex products such as managed funds (including KiwiSaver) and futures contracts; and category two products including insurance and simpler ones like term deposits and mortgages.
This monitoring report also includes findings from a completed industry review into KiwiSaver sales systems. The thematic review was based on data provided to the FMA by 10 firms this year.
The report shows the FMA has found inconsistency in the quality and maturity of systems, and the practices in use across the industry. The main issues highlighted in the report are:
The FMA’s director of regulation, Liam Mason said the FMC Act brings a new approach to financial services, where the focus of regulation was on the conduct of providers of financial services and the impact that conduct had on customers and on markets.
He said the sales and advice monitoring work undertaken by the FMA indicated a high degree of willingness among firms to meet their obligations and adjust to the demands of the new legislation. However, as previously commented upon in other areas of the new regime, the FMA believes that the full adjustment to the expectations of the regulator and of consumers would likely take a few more years in terms of sales and advice, when the FMA, the industry and consumers would see more directly the benefits of the new regulations.
“We’ll be stepping-up our efforts to accelerate the change and to ensure providers are systematically putting the interests and outcomes for consumers at the centre of their processes,” Mr Mason said. In the coming months, the FMA would ensure:
“Firms and advisers are showing considerable goodwill to the spirit of the FMC Act with its focus on conduct and the interests of customers.” However, Mr Mason said, “good intentions are all very well, but firms need to hardwire into their core processes and structures the focus on the customer that we have been talking about.”
“The new regulatory system in New Zealand is designed to give the FMA more means to act, and to improve results. We recognise we are part way through a transition period to the new regime. We’ll continue engaging directly with firms, through supervision and guidance, so they implement the right systems themselves and effectively manage their new obligations.”
Read the report here.
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