Govt not throwing baby out with bathwater: Ballantyne

Government moves to introduce conduct licensing for insurers are being welcomed as proof it's taking a sensible approach to reform.

Wednesday, September 25th 2019, 9:10PM

Commerce and Consumer Affairs Minister Kris Faafoi revealed on Wednesday that legislation would soon be introduced that would bring in a new conduct licensing system, a ban on soft commissions and sales-linked bonuses and require providers to meet a fair treatment standard, with policies and systems to make sure that happened.

The Financial Markets Authority will be given greater powers to tell insurers and banks how to behave.

It is in response to reports by the Reserve Bank and Financial Markets Authority on the conduct and culture of banks and insurers.

Naomi Ballantyne, managing director of Partners Life, said she was comfortable with the plan.

The Government had focused on the right things, she said. “It doesn’t appear to be throwing the baby out with the bathwater.”

There had been suggestions that the Government might try to reduce upfront commission levels with this piece of legislation but it has not done so. She said it was positive that the Government was hanging back and only acting on the issues that had clearly been identified as problems.

There will only be a general obligation for banks, insurers and non-bank deposit takers to consider the risks and harms their remuneration and incentives can create and to design them in a way that is consistent with the fair treatment standard.

She said the insurance sector had already moved to drop soft commissions for advisers.

That ban made sense, she said, because those incentives had the potential to drive behaviour that was not in the interests of clients.

In a statement, Suncorp, which operates Asteron Life, said it supported the focus on delivering good outcomes for customers. “We are committed to putting he customer at the heart of everything we do. We look forward to understanding more about the new regime and the role we can play to help build confidence in the financial services industry.”

AIA referred questions to the Financial Services Council.

FSC chief executive Richard Klipin said the proposals should help ensure customers were at the centre of the industry’s focus and help to build public confidence.

“The focus of the new regime on licensing, expanding the FMA’s remit, and ensuring remuneration practices serve good and fair client outcomes is entirely appropriate.

“We now need to see the detail behind the proposals and we look forward to working closely with the Government on this and the eventual implementation of the new regime.”

Financial Advice New Zealand chief executive Katrina Shanks said the Government had shown it valued the work of financial advisers.

It was positive that the Government was willing to wait and see what effect the Financial Services Legislation Amendment Act (FSLAA) had before imposing any more changes on advisers, she said.

The application of a code of conduct to all financial advisers under the new regime should have a marked impact on the sector, she said.

Shanks said it was pleasing the legislation would be allowed time to settle.

She also welcomed clarification that insurers would not be responsible for the advice of financial advice providers.

Ensuring stakeholders understood the need to keep this round of legislation separate from FSLAA had been a key focus for the association, she said.

“Financial advisers can operate in our own legislation and providers don’t have to reach into what’s good advice. They’re not responsible for the advice part of the cycle.”

Tags: AIA Asteron conduct Financial Advice New Zealand Financial Services Legislation Amendment Bill FSC insurance insurers Katrina Shanks Kris Faafoi licensing Naomi Ballantyne Partners Life