Compliance will be a 'constant adaptation process'

It’s been almost three months since the release of the Royal Commission final report, and New Zealand’s own answer to the need for tighter regulation – the Financial Services Legislation Amendment Bill (FSLAB) – finally passed into law earlier this month.

The move was widely welcomed by an industry keen to see a raising of standards, and according to legislation and compliance expert Leigh Hodgetts of Astute Financial, the adviser businesses which had proactively prepared for the legislation prior to its passing are now in the best position to thrive.

“I’m Australian myself, and I had worked under the Australian regime for many years before coming to New Zealand,” Hodgetts told NZ Adviser.

“In doing that, I was able to make sure that we could prepare for the changes that we knew were going to happen here. In a short period of time, that put us way ahead of the pack as far as licensing and getting our compliance, policies and procedures sorted.

While we are well down that path, a lot of our competitors were slightly sitting on their hands and waiting for the legislation to drop before really thinking about it.”

Hodgetts says that the aftermath of the Royal Commission has been particularly hard on insurance businesses, though mortgage adviser businesses have also been hit by the recommendations of the report. She says the Australian government has now backpedalled slightly on its stance, and that anything happening in Australia will likely have a gradual drip-feed effect on the New Zealand market in turn.

“There has been a huge outcry from the people running small adviser businesses in response to the Royal Commission final report, and the government have taken that on board and will tone that down significantly,” she explained. “But there will still be major changes, and we’ll feel that here too in the form of a gradual change in how we do business, and how we work with the lenders. It’s been a constant adaptation process.”

“We also don’t have the issues that Australia has with trail commissions,” CEO Sarah Johnston added. “Trail has only just come back into the New Zealand market, so nobody has been as hugely influenced by that as they have been in Australia. The soft incentives issue is also something that needs to be shut down in the insurance sector, but that’s not an issue at all in the mortgage space. That’s never what we’ve been about either – it’s all about good client outcomes, and that’s how we will continue to operate.”