Let the dust settle on CoFI says former exec
A week into the CoFI regime one industry commentator says consumers do stand to benefit from providers having to work hard to ensure they hold on to their licences.
Wednesday, April 9th 2025, 6:26AM 
6 Comments
by Kim Savage
A week into the CoFI regime one industry commentator says consumers do stand to benefit from providers having to work hard to ensure they hold on to their licences.
Former company executive David Whyte, now a consultant under DCW Management, says licensees will need to continue to invest in the systems behind their Fair Conduct Programmes.
“I'm very familiar with the internal mechanisms of product providers, and to that extent, the process of creating a fair conduct program has actually flushed out a number of issues that some of the product providers weren't even aware were issues certainly.
“The FCP created some awareness of things they didn't believe would be an issue, mainly systems driven, which is where the failures, if you like, or the issues have arisen with product providers overall since the FMA started to operate.”
Technology will play an important role in CoFI having a positive impact for all stakeholders and with regulation comes a validity which might not have been there before, says Whyte.
“I can't see any downside in having CoFI legislation require product providers to meet standards of conduct and culture that mirror those under FSL, CCCFA.
“So in that respect, it's going to be consistent.”
Financial advisers will also benefit, says Whyte, from providers having to meet their obligations under CoFI.
“If I'm a financial adviser, I would like written evidence from those licensees that they are meeting their obligations under CoFI so I can give my client the comfort that a product recommendation from a product provider has more than just price and a glossy brochure type substance.
“At the moment, despite the FMA having made statements about demarcation, the product providers are taking it upon themselves to ask the financial advisers if they’re meeting the product providers obligations under CoFI, which is nonsense. It's the only way around.”
“The relationship will certainly always have its points of debate and discussion, but the fact that there is a collaborative interaction is far more advantageous to the consumer than having the conflict which occurs elsewhere. We're living in a very privileged environment.”
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When the impact of FSLAA was to increase average commissions, as a play for more business while we are facing ongoing premium increases, you have to question what is coupled here. No, I'm not looking for a pay cut. It's more that this behaviour will have been seen and noted by the FMA.
The issue of incentives under CoFI and the link to persistency is an interesting one.
An adviser can't be paid more for retaining clients but gets paid more for new business. While persistency isn't a perfect measure by a long way, it is a measure of retention.
Replacement is a concern for the FMA, yet the measure of replacement is an unwanted incentive? At the same time, the FMA wants advisers to ensure that clients have the best approach for them with regular reviews and replacement of cove ras appropriate.
An adviser doing the right thing puts the right cover in place, manages that cover through its life cycle and recommends disposing of it when it's no longer needed.
The FMA is concerned about replacement, while the only thing persistency is potentially doing is possibly resulting in clients holding policies longer than they should? That's a long bow to draw as an incentive. The ongoing renewal is more of an incentive to maintain that policy.
The idea that life insurance is like car insurance and that you can change providers every year or other year is fraught. The point of life insurance contracts is to cover the long tail risks; it's not about immediate realisation, though that happens. So I'm a little confused on what the message actually is because the various guidelines and legislative requirements are contradictory.
As always, the adviser is the meat in the sandwich, with the judge and jury external to all of it.
Don't get me started on service; it's abysmal!
Anecdotal evidence gathered at FANZ 2025 in ChCh and elsewhere confirms that intermediaries are not being provided with the appropriate level of service for their clients from many of the product providers involved.
While it's unlikely that EVERY provider has abysmal service standards, it seems to be a pretty widespread malaise.
My concern centres on sub-standard service conduct from product providers being blamed on FAs and/or FAPs - the client's first point of contact.
With CoFI in place, I'm advocating that the regulator will be proactive in responding to inadequate support standards and put the responsibility and accountability where it originates.
When I used to take a more hands on interest, I used to wonder why the Financial Institutions didn't put up a bigger fight against the COFI legislation.
To my mind the preoccupation with conduct was in the same thought box as DEI and ESG - pretty and appealing concepts without much guts.
My current hypothesis on why say the banks didn't fight harder was because they were concentrating on bigger fish like capital rules and anti-competitive attacks and so didn't want to queer their pitch with officials on a peripheral battle - sure it was going to cost them to comply but that was relatively small beer.
I wonder whether they will repent at leisure when the inevitable cases for breaches are brought against one or more of them.
There is really no point of having an offence unless some transgressors are brought to heel.
There's been a lot of negative talk about the FMA on GR comments sections, but they are at least willing to talk and (to some extent) listen to industry.
The problem with COFI is that despite what they might say publicly, it's not an FMA driven initiative, and even in the unlikely scenario the RBNZ would be willing to talk to, say, insurers, they do not have personnel with the skills or experience to even understand industry feedback.
I can't speak for banks, but insurers DID put up as much of a fight as was practicable in the early days of COFI. Unfortunately, you can't really fight the RBNZ as they can just unilaterally and arbitrarily decide to 'review' your assumptions and capital requirements.
The RBNZ has a LOT to answer for, unfortunately they don't seem to answer to anyone.
The key challenge with providers isn’t just turn around times, its the attention to detail, decision making, and general lack of knowledge that is the daily grind.
Multiple examples in the last year where the lack of historic product knowledge has been impacting clients.
One was five months to get an answer on what a policy was yet the provider had been taking premiums for 20+ years.
Another the incorrect premium structure was applied at renewal and they didn't have the product material for the product, I had to find it and provide it to them! Lucky I did have it.
The outcome for advisers is dramatically higher rework rates as things get sent back to be done right multiple times. nib alone accounted for a four fold increase in our turnaround times for clients, and they still are out there. Others are having their challenges too.
It isn't unusual to have something come back with errors, spelling, address, typos, not to mention the challenge of multiple items needed and only getting one back.
Its got so bad that our standard approach is to send one task item at a time to providers, we can’t trust that they will read what we are requesting and we have to dumb it down to single work items. Nuts.
Then there's claims, turn arounds have blown out, I’m being told three weeks for medical claims with two of them presently.
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Their conduct is the concern. Monitoring advisers is not the supplier's job; it is the FMA's role.
I sincerely hope suppliers get the message and start to finally address service issues that roll downhill through advisers to clients. For many, their poor service is now beyond excuse and very serious.