With both regulator reviews and the Royal Commission final report finally released, the banking, insurance and financial advice sectors continue to grapple with what it will ultimately mean for their operations – but according to Lyn McMorran, executive director of the Financial Services Federation (FSF), the implications for New Zealand will be significantly less drastic than they will be across the Tasman, and will focus heavily on simply straightening up processes.
McMorran says that a new compliance regime will not only focus on whether you’re in line with the law, but how that sits within your culture and how it’s leading to good customer outcomes.
“At the moment, we think most people are doing relatively well with that,” McMorran told NZ Adviser. “But you can always look at your processes a little more carefully and ask – “Are we just looking at customer satisfaction, or is this actually the best outcome for them? Can they be sure that the business that’s being referred to them through a broker channel is taking those customer outcomes into account?”
“The fact that misconduct is not as systemic here is perhaps down to the fact that financial advice is much more required in Australia,” she continued. “The average Australian will need to seek that advice at some point in their lives, and often more than once, whereas New Zealanders don’t use it as much. But that isn’t a good thing as they’re probably underinsured and under-prepared for retirement, and it’s also driven a culture where people here are less inclined to pay for financial advice.
“The FMA has said it’s not looking to ban commissions – because it really can’t. It’s not just the banks that are under the spotlight in Australia, the recommendations that have come out could really damage the broker industry, and that would not benefit New Zealanders.”
McMorran says getting FSLAB over the line will be key to ensuring good outcomes, as it will bring all advisers under the same regime and ensure that everyone across the industry is held to the same standard.
“It will mean that they’re subject to that same code and the overarching principle that you put customer interests first,” she said. “The regulator can then make sure that that’s exactly what you’re doing, and if you’ve recommended a certain product over another and that product gave you better commission, you’d need to justify why that product is better suited to the customer. That will definitely be a good thing.”