FMA: You shoudn't need a 'how to' client-first guide
New Zealand’s financial services sector shouldn’t require a “dummy’s guide” to regulation, the chief executive of the Financial Markets Authority says.
Tuesday, November 8th 2016, 6:00AM 
3 Comments
by Susan Edmunds
Rob Everett
Rob Everett spoke to the Workplace Savings NZ conference yesterday.
He said he had watched with interest – and some disappointment – how some commentators had become tied up in knots about their requirement to put the customer’s interests first, “bemoaning a lack of definitions and generally using up a lot of oxygen and energy wailing about different standards".
“Whatever you call it – a fiduciary duty, good conduct, putting your customer’s interests first – it all comes down to what actually happens. What the customer experiences of your service; and the results they get from what you sell them, or advise them to purchase, to meet their needs," Everett said.
He said providers should be sure that they were comfortable the customer understood what they needed to meet their goals, that what they were being sold was a good fit, that the provider had explained how the product was likely to perform, including in choppy markets, and the fees and costs of the product were made clear.
“Have you explained that although you may look as if you are independent of the various product providers you guide them to, that in fact they flew you to Las Vegas for four days last year or that in fact more than half of your business actually goes to only one provider. What were they expecting from you? And did you deliver that?”
He said there was an inherent imbalance of information between the provider and the consumer but that was not helped by “dumping” information on them.
“Transparency is only useful when combined with articulacy and ease of use."
He said KiwiSaver providers had a privileged position because they had people flowing into their businesses through default schemes.
“Earning fees for managing their money – typically with few demands, challenges or even questions from the customer. The quid pro quo of that privilege is that the providers need to engage with them, proactively and assertively.”
He said the sector had good intentions when it came to improving its customer focus but there was still work to do. The FMA had to bring together its two mandates: Regulating the conduct of the industry and equipping consumers with the capability to engage with it.
“When you talk to providers they get the common sense and commercial and regulatory perspective that they ought to be properly concerned with the interests of consumers. But if you dig below the surface there are very varied levels of understanding of what that might mean.”
It was harder for big institutions to make large-scale changes. “They get it but the draft conduct guide and the reaction to that does tell us that some organisations are a bit surprised when we say we see things that we weren’t terribly impressed by.
“It’s early days but people are trying. It’s up to us to keep leaning on them as hard as we can.”
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Comments from our readers
To suggest that this situation is good is a cop out by the FMA and no doubt brought about by the influence of their political masters at MBIE.
MBIE’s stated mission is to create a “supportive and dynamic business environment”. That tells us pretty clearly why regulation in NZ favours business over consumers. The bigger the business the greater the favours.
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