FMA outlines plans - has eyes on advisers

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The Financial Markets Authority is laying out how it plans to use its new, increase level of funding – and advisers can expect to receive its attention.

Wednesday, August 30th 2017, 6:00AM 1 Comment

by Susan Edmunds

Last year, the Government agreed to increase the amount of money the regulator gets, primarily from market participants.

It was the first time the FMA’s funding had been reviewed since 2011 and the FMA committed to increasing transparency about how its funding applied to its work.

It has released a new annual corporate plan to set out the priorities for the year to June 2018.

"This plan does not represent every aspect of our work. We will keep reviewing our landscape and environment and will respond to any new risks and harms over the course of the year. Many of the risks and harms we are seeking to address are complex and require longer term strategies."

The plan indicates a number of ways that advisers will be affected by its priorities.

Insurance advice is set to get more attention.

The FMA said it would continue to build its view on potential harms in the insurance market over the coming year.

“We want to continue to raise standards of conduct and encourage customer-centric practices in sales and advice of insurance products, highlighting deficiencies in practices.”

That will include its work on churn and more investigation to address instances of adviser misconduct.

It will also look at vertically integrated businesses and "conflicted" business models. "This will include looking at incentives and sales processes. We will also look at conflict management policies and procedures."

The FMA will also support the design of the framework for the new advice regime, which it said would mean a significant workload to ensure licensing was fit for purpose.

"We want to ensure industry has a good understanding of the requirements and is ready for implementation. We will devote significant resource to market engagement activities (including holding workshops and publishing relevant guidance) in support of these aims."

It will also review its referral process to the Financial Advisers Disciplinary Committee "to increase visibility of precedent and adviser conduct guidance from its decisions".

The FMA said it also wanted to understand more about those advisers currently operating as RFAs.

A key performance indicator would be that market participants could demonstrate alignment of sales and advice processes resulting in good customer outcomes.

Gavin Austin, a former FMA staffer who now runs compliance firm ABC, said it was "about time" that the regulator paid attention to vertically-integrated businesses.

"It should be good for independent advisers.  Advisers - let’s call them salespeople - in a vertical integrated model mostly 'sell' what their masters - their employers - tell them to – not a lot of advice that 'puts the customers interests first' when in far too many instances the products being recommended are not necessarily 'suitable', but the poor consumer trusts the brand offering the 'advice'."

Tags: Churn compliance conduct FADC financial advisers FMA Insurance Advisers regulation RFA

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