FMA issues report on sales and advice for authorised, registered and QFE advisers

by NZ Adviser17 Nov 2015
The Financial Markets Authority (FMA) first monitoring report released today covers sales and advice practices within the main financial services providers.

Practices for both category one and category two products are addressed and findings from a completed industry review into KiwiSaver sales systems are also included. 

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:

•    Lack of comprehensive governance systems – which allow firms to establish the right culture in sales and advice practices from the top of an organisation. Insufficient reporting to senior management on sales and advice outcomes, and inconsistent attention to managing conflicts of interest in sales and advice practices

•    Inadequate attention to ensuring that consumers have access to appropriate information and advice, relative to their specific needs and the types of products on offer

•    Lack of comprehensive compliance systems that can provide firms with reassurance that they are addressing all of their regulatory and conduct risks in sales and advice.

FMA 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.

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,” Mason said. 

“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.”

The FMA stated it would ensure in the coming months:
•    Close attention, in FMA’s monitoring and supervision, to sales and advice practices, especially in areas that pose a higher risk to investors

•    Further engagement with boards and senior management, to directly improve the quality of sales, information, and advice systems, so the interests of investors are systematically prioritised in the culture of an organisation, and ensure firms are meeting their conduct obligations

•    Further guidance from the FMA, in consultation with firms, so they understand the FMA’s expectations behind the principle that customers’ should be able to access relevant information, support and advice where necessary.

Read the report here.

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