Brown: Advisers struggling with principles-based approach

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Financial advisers are struggling with the “principles-based” approach to regulation, says the FMA’s  Sue Brown.

Wednesday, August 28th 2013, 5:39AM 4 Comments

by Susan Edmunds

Financial advisers are struggling with the “principles-based” approach to regulation, says the FMA’s  Sue Brown.Brown is now the head of innovation, strategy and engagement but had previously been tasked with overseeing advisers.

She said all advisers were expected to be governed by the principle of “client first”. But some struggled when that was not laid out in clear rules or processes that they should follow. 

She told the 9th annual securities law conference in Wellington yesterday: “They say ‘where are the rules, how do we know we’re doing that?”

Brown said advisers needed to act as professionals and put their clients first by giving them the best products for their needs, not the products that offered the best commissions. Ross Asset Management and the collapse of finance companies had taken a toll on investor confidence, she said, and if that was to be rebuilt people would need to see the market putting their customers first.

“We expect the market to operate above the bare minimum,” she said.

Too many advisers were working with a “tick the boxes” approach, she said, targeting the minimum standard.  “You should be targeting the higher standard that you want to achieve to develop a sustainable business.”

Brown said the FMA was focused on lifting real compliance. It would be more lenient on advisers who had shown they had made a sincere effort to comply and had something go wrong than it would be on advisers who made no effort to meet the requirements.

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