OPINION: The winds of change can’t be ignored

The start of 2019 has been a challenging one for the financial services sector, not only here in New Zealand but also for our neighbours over the Tasman and the world over.

Monday, March 11th 2019, 10:37AM

by Richard Klipin

Richard Klipin

The winds of change have not just been blowing but at times howling.

Over the last two years we have seen a clear effort from regulators to drive change and deliver better consumer outcomes here in New Zealand. Whether it has been through thematic reviews, conduct and culture reports, or set-piece speeches, the message has been the same.

Ministers are now taking this work to the next step with a programme of legislative reform.

As an industry our response was slow off the mark. We have now however started to act, for example adopting the FSC Code of Conduct and stopping overseas conferences.

We need to move quicker though and do more across every part of our value chain.

Governance, conduct and culture are the new watch words and we will be judged on how we own our future and improve what we do for New Zealanders – we have been put on notice.

Financial Services is a large, capable and growing sector. We need to embed best practice, conduct and culture into the heart of everything that we do to improve outcomes for every generation.

Like many others, we are an industry that faces constant change through impacts from the global economy, technology and population changes. We need to continually develop and adapt our products, how we deliver advice and how we keep pace with change.

As we heard over the past weeks, the issues here in New Zealand are not systemic, and the good work of the many thousands of front line teams and their strong focus on delivering good customer outcomes was acknowledged.

So, we don’t need to start from scratch. However, we do need to address the key governance, process and remuneration issues and work with Government and regulators to do so effectively.

We need to be considered in our approach to the big issues. The discussion and criticism around remuneration has left many in the sector frustrated.

This is understandable but so is the concern of regulators and the Government that there are “perverse incentives” in existing remuneration structures that result in the interests of consumers not always being first.

As the debate about remuneration continues, we need to better communicate the value of the products and services our sector delivers and the value of quality financial advice.

We need to make sure that the remuneration model represents fair value and price and that it is clear for those taking advice what they are getting in return for what they are buying.

Quality financial Advice has a transformative value, and this needs to be recognised so that New Zealanders that want and benefit from it can still access it.

The Government has set us a challenge to respond and engage with the issues raised in recent months. The onus is now on us as an industry to respond in a constructive and useful way. The fact that over 1350 advisors are attending the Navigating Regulation Summits suggests to me there is a real appetite from the industry to do just that.

Whatever happens next, it is clear where we land must have conduct, culture and the best consumer outcomes at its heart.

This is the new normal and we ignore it as an industry at our peril.

Richard Klipin is the CEO of the Financial Services Council.

Tags: FSC