The role of FAPs in building consumer confidence

With New Zealand’s financial literacy so low, how can financial advisers encourage Kiwis to take steps to improve their wealth management?

Friday, August 25th 2023, 6:00AM

by Andrea Malcolm

An industry panel shared its thoughts with advisers at this year’s Financial Services Council conference.

FMA director of deposit taking, insurance & advice Michael Hewes says there are now 1407 FAPs, with around 40 new licences processing at any one time, showing there is still a demand from people to enter the industry.

He says FMA expects to do 60 to 70 monitoring visits by March next year and will release a monitoring report highlighting observations from that process.

“At this stage monitoring is very much focused on where we get complaints and recidivist offenders. Overall, it’s been a very collegial and collaborative approach with industry.”

If a business is well-run, compliance with an FMA audit is a byproduct, he says. “It’s about doing the work, recording the work, and reporting the work. He says most advisers are good at what they do, but may not be so good at the reporting end.

“So we’re trying to pivot the conversation to - do what you’re good at and look for partners to inject some horsepower and additional skills to bridge gaps.”

Financial Services Complaints Ltd CEO Susan Taylor says if you outsource services you need to be on top of what is being provided because you can’t outsource responsibility.

“Building consumer confidence is about having a sustainable financial advice business that is there long term for customers, including having systems and processes to keep customer data safe from cyber attacks.

“And I suppose in line with that is knowing that individuals who are providing advice to consumers have continued their education.”

Positive stories

NZ Financial Services Group head of customer outcomes Trecia Brown says how the industry promotes itself, the language used and how it comes across to the consumer, should be considered. “Keep the language about the industry positive because that will ultimately give the consumer confidence.”

The Adviser Platform managing director Ryan Edwards says good word of mouth elevates the industry. He says TAP helps advisers run their businesses with the correct framework, structure and protocols in place. “When they’re with a client they can represent the industry well, and be documenting those meetings because that’s where you capture the small behaviours that drive good outcomes for the customer experience.”

Complaints

Taylor says being proactive around the complaints process will help raise consumer confidence.

She says only one in three New Zealanders would know what to do if they felt they’d been unfairly treated or received poor advice.

“Letting them know what your complaints process is, and that you’re part of an independent, external dispute resolution service is important.

“I say to people, encourage complaints. Don’t shy away or make it difficult. If they don’t complain to you, they’ll do it to friends and family and worst of all, on social media.``

FSCL audits members' websites and some have no complaints procedure information or it's buried 12 pages deep.

“Nobody likes getting a complaint but listening with an open mind will help to resolve it and avoid escalating to a dispute resolution service or to the FMA.”

Sheepish on disclosure

Coming back to the language, Edwards says he still comes across advisers who are almost apologetic about the disclosure process.

“It’s almost ‘I have to sneak this bit of paper across you for compliance’ rather than ‘as a professional these are my obligations, this is how I’m going to do a good job and this is how you will know I’m doing a good job.’ I don’t think there is any other profession where someone would try to hide the fact that hey, we’ve got a formal way of working together and if things go wrong, there are ways to remedy it.”

Brown would also like to see more diversity in the adviser network.

The FMA has done a lot of work with Māori and Pacific Island communities to encourage them to get advice when needed, says Hewes. He says it also does “perimeter work” dealing with social media influencers giving their opinions on finance, the growth of crypto, or advice by community or church leaders - none of whom are registered financial advisers.

A lawyer in the audience said he recently fired a financial adviser because of very poor communication.

“It was probably not a bad product or advice but I couldn’t interrogate it in any sensible way. I feel there could be improvement on how advisers communicate. Many are still using jargon like loadings and pullbacks, especially in insurance.”

Taylor says communication is probably the main root cause of complaints. “Sometimes they’re talking at cross purposes or the adviser hasn’t got to know the client well enough. Jargon is second nature to us but it won’t be to the client. If you’re sending out written material, put yourself in the reader’s shoes.Shout out to the Retirement Commission's booklet De-jargoning Money.”

She says there are also other forms of communication beyond the written word such as video and simple animation.

Tags: FAP FMA