Shifting the dial on good advice
Some financial advice providers are taking an overly conservative approach to meeting their regulatory obligations, the Financial Markets Authority (FMA) says.
Monday, February 10th 2025, 6:00AM
by Sally Lindsay
Some financial advice providers are taking an overly conservative approach to meeting their regulatory obligations, the Financial Markets Authority (FMA) says.
FMA chief executive Samantha Barrass says it will want to understand the reasons for this, particularly to check that business models are not being skewed by an unnecessarily cautious approach to compliance thereby creating friction and restricting the availability of advice.
Speaking at the Financial Services Council Outlook 25 breakfast, she says in these cases, the FMA’s feedback isn’t focused on “doing more compliance” but working with firms to understand the roadblocks and to rethink how they are approaching their decisions for achieving the overall purpose of the financial advice regime.
“Good practices are not always about meeting regulatory requirements to the letter of the law, but also about shifting the dial on how regulation positively impacts the value of advice and the level of consumer trust and confidence in seeking financial advice.
“This is regulation with a purpose, not regulation for the sake of it.”
She says the FMA’s focus on the things that matter extends beyond just its monitoring and supervisory relationships. “We are also applying this focus to the wider work we do to support innovation and growth.”
In December it launched a pilot regulatory sandbox, opening it up to expressions of interest.
“By testing a product or service in a regulatory sandbox, we should be able to better assess the viability of innovative products and services and gain insights into the innovation’s potential impact on investors and consumers.”
It has received 14 expressions of interest already. Barrass says the regulator has been impressed by the quality and breadth of the applications.
The pilot will be done in two cohorts, and the FMA is in the final stages of confirming the first round of successful applicants who will take part in the sandbox.
In the pilot the FMA will partner with startups and established firms to test innovative products, services or business models to help spur and incubate innovation in a controlled environment.
Barrass says taking a pilot approach gives the FMA the chance to gain greater insights into the benefits and risks of financial innovation and new technologies.
“By testing a product or service in a regulatory sandbox, we should be able to better assess the viability of innovative products and services and gain insights into the innovation’s potential impact on investors and consumers.”
A key focus for the FMA this year will be the CoFI regimes, which comes into force at the end of next month. So far 67 licences have been issued.
During the implementation of CoFI, the FMA will release an insights report on fair conduct programmes. “This will highlight observations we’ve made through engagement with firms during the licence preparation and assessment period, Barrass says.
The introduction of CoFI is particularly timely, she says, when the FMA looks at some of the key priorities of the Government, namely competition in the banking sector. 
“When we think about the systemic issues that underpin low innovation and lack of consumer choice of financial products, some of the changes firms might make under CoFI will help serve to increase competition.
“This includes looking into systemic issues that reflect a lack of competition and can be dealt with as a matter of conduct regulation, such as legacy IT systems which lead to poorer outcomes for consumers.”
Barrass says how firms implement their fair conduct programmes could also inform issues relating to customers switching to competitors, impediments to innovation, and enabling distributors, such as mortgage advisers, to provide greater transparency to support decision-making by their customers.
The FMA also wants to ensure its regulation is consistent with growing the economy and enabling innovation. New Zealanders should have access to the leading edge financial services and products that will enhance their lives, Barrass says.
Monitoring of financial advice providers has continued to evolve, focusing on what compliance is actually achieving.
The introduction of CoFI is particularly timely when we look at some of the key priorities of the Government, namely competition in the banking sector.
When we think about the systemic issues that underpin low innovation and lack of consumer choice of financial products, some of the changes firms might make under CoFI will help serve to increase competition. This includes looking into systemic issues that reflect a lack of competition and can be dealt with as a matter of conduct regulation, such as legacy IT systems which lead to poorer outcomes for consumers.
How firms implement their fair conduct programmes could also inform issues relating to customers switching to competitors, impediments to innovation, and enabling distributors, such as mortgage advisers, to provide greater transparency to support decision-making by their customers.
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