Does financial services industry need four disputes schemes?

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The chief executive of one of the country’s financial services external disputes resolution services is not worried that the Financial Advisers Act review issues paper seems to be taking aim at them.

Monday, June 8th 2015, 6:00AM 4 Comments

by Susan Edmunds

The issues paper asks whether having four approved schemes is the right thing for consumers.

“New Zealand’s dispute resolution regime is unusual in that it has a number of different schemes effectively competing for financial service providers as members. As part of the review we will be considering the impact of this competitive dynamic,” the paper says.

It said feedback from the industry had indicated that competition could be constraining the activities of some schemes, although it had no indication that competitive tensions were influencing schemes’ judgement or independence.

“Aside from competition between the schemes themselves, the existence of overlapping schemes with differing rules and jurisdiction has some potential negative effects. Consumers may lose confidence in dispute resolution if it becomes apparent that a complaint would have a different outcome depending on which scheme the provider belongs to. While the current differences between approved dispute resolution schemes are relatively small, we would be interested in whether stakeholders think that differences in scheme rules are causing any issues at present.”

It said the existence of multiple schemes was also commonly cited as a reason for a lack of consumer awareness, and confusion about how the regime works, although having multiple schemes could keep fees down for financial service providers.

Susan Taylor, CEO of FSCL, said she was not worried. But she said the issues paper had made some mistakes. She said Australia had two competing schemes, so New Zealand was not unique.

“We recently had an independent review which looked at the issue of competition and decided on balance consumers are not disadvantaged.”

Having multiple schemes helped them to run more efficiently which benefited the consumer, she said.  She said she would be surprised if any major changes were made as a result of the review because the regime was still new.

Taylor said there had not been any evidence of any scheme-hopping by financial services providers, which could happen if they perceived one provider was more lenient than the others. “If there was any evidence of that it would be a cause for concern but there is no evidence.”

Tags: Financial Advisers Act FSCL

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