FMA Supervision Insight Report: The good, the bad and the ugly

Industry reactions to the FMA’s recent report in light of incoming regulation changes.

Tuesday, September 29th 2020, 7:21AM

by Daniel Smith

The recently released FMA Supervision Insight report called for changes to governance and compliance for parts of the industry not yet up to the standard of the new regulations. The report offers a glimpse at the changes that are looming for the industry for any advisers who were not already aware.

The Financial Services Council has welcomed the FMA’s report with open arms. CEO Richard Klipin told Good Returns that “the sector collectively has worked really hard to ensure that this transition is effective, orderly. It’s encouraging to see the numbers of advisers growing. But for the people who have not yet made a call, the clock is ticking.”

Klipin stated that although the regulation changes will substantially affect the sector, particularly around the tiers of accountability, “we’ve also had a lot of time to get used to it”.

Ryan Edwards of The Adviser Platform (TAP) is in an interesting position to see a different angle. TAP provides services to help raise advisers up to the standard of the new regulations, so they interact with advisers who might be most affected by the changes.

Edwards said that he sees “large sections of the industry aren’t taking the change in regulation as seriously as they need to be”.

While Edwards agrees with the FSC that there is positivity in the report’s showing a large number of advisers embracing change he is concerned that “there is an equally large section of the market that is hanging out pretending that these changes aren’t going to happen”.

“We are very happy with the incoming changes, but there is more of the market that needs to draw a line in the sand and decide that they need to make some changes for the better.”

An FMA spokesperson told Good Returns that “our monitoring has shown areas of concern in the advice process, record keeping and continuing professional development. While large parts of the sector are working hard to meet our expectations, we are looking for significant improvement in the compliance and conduct of advisers, especially as the new regulatory regime begins on March 15, 2021.”

The spokesperson went on to say that the FMA is ready and willing to take “increasingly strong action where deficiencies are not remedied appropriately or in a timely manner.”

FMA CEO Rob Everett noted that the New Zealand financial services sector is “at a point now where the volume of FMA guidance, level of engagement and maturity of the regulatory regime mean there are no excuses for conduct that presents harm to investors, customers and the integrity of the markets. While we have seen positive evidence of genuine customer focus during Covid-19, there is more work to be done to build a sustainable customer-centric culture.”

But it seems that the industry is willing to make the required changes. FMA data from granted licence applications so far shows that an estimated 7,300 advisers are to be covered under a FAP licence. That’s around 80% of practicing advisers that are well on their way to getting ready for the regulation changes.

For those advisers who have not yet begun the processes for change, the FMA doesn’t mince any words: “Advisers can expect to see the FMA taking a hard line on anyone operating without a licence when the new regime comes into effect.”

For peace of mind the FMA recommends that advisers should get licensed or know whose licence they will be working under before the summer break.

Tags: FMA FSC licensing regulation TAP