Financial advisers were put on notice by the Financial Market Authority (FMA) this week when they heard that incoming regulations would benefit all.
Outlook 2020 was organised by the Financial Services Council to get as many people as possible in the room with the FMA’s CEO Rob Everett. Around 250 people filled a room at the Pullman Hotel Tuesday 4 February.
Everett was at pains to say the FMA wanted to support and work with financial advisers; to understand their issues and bend to meet them where possible. But that ultimately, everyone benefits – the industry and the consumer – when clear regulations are in place and adopted by advisers.
“One important aspect of the FMA’s work that I would like to highlight today is our preferred route of working closely with both providers and users of financial services,” he said. “We do this to ensure that our expectations reflect the reality of users’ needs, and that what we require of providers is achievable and fair.
…within the industry there is a committed group of people who are motivated to get the right outcomes for customers.
“I think it’s fair to say that over the last 12-18 months we have been surprised, disappointed and occasionally downright frustrated at parts of the industry. I have had occasion to be pretty blunt about that. But I also know that within the industry there is a committed group of people who are motivated to get the right outcomes for customers.
“I want to take this opportunity however to reinforce that if we all agree on the basic expectations around the way retail financial services are delivered and the outcomes that everyone is aiming for, the regulation of that area does not need to feel revolutionary or overly prescriptive. We want to offer the carrot.
“The objective of the legislative changes was to increase access to quality advice – by ensuring there are common minimum standards of competence and conduct for anyone calling themselves a financial adviser or a provider of financial advice.”
Having delivered his prepared 20-minute speech Everett was joined on stage by Richard Klipin, CEO of the Financial Services Council.
Klipin commented that looking to last year there was some level of pain for advisers as they came to terms with incoming regulations… Everett agreed saying it’s time to move the debate to what’s good for consumers.
The hard work of changing practices and business models – and in some cases culture – can take take a lot of time and effort…
“The key development that I see when I look back to last year – and it may have been painful for many – is to move the debate to what we are all trying to deliver for customers and investors. What does that look like?” said Everett.
“There is a period where we don’t see eye-to-eye on a bunch of stuff, and we give you marks out of 10 for stuff that we’ve seen. And in some cases that doesn’t go so well.
“The hard work of changing practices and business models – and in some cases culture – can take take a lot of time and effort. It takes sustainable commitment.
“I feel that if we can get the conversation into ‘come on now what does good conduct look like?’ and how do you enshrine that into your businesses. Rather than us (FMA) imposing something on you or telling you what to do…that’s where the industry needs to be. And that’s a conversation that should never stop.”
Lessons from abroad
Looking abroad, Everett says consumer financial services in other parts of the world are regulated directly and closely by several different regulators.
“There are bits of that in New Zealand,” he says. “But there’s a gap. And my belief is that however hard we work together, and however much I’d like this to be a collaborative conversation, if you don’t have the law at least setting out high level expectations of what financial service advisers are doing for their customers, then you don’t get off the starting grid. It is a tough-love situation.
“If the goal is to encourage people into financial services and buy life insurance and take advice or buy products they might not otherwise have bought – because they are confident they will be looked after – then the industry benefits and the consumer benefits.
“I think the money spent on regulation will be well worth it – and if everything is going well then the FMA will be in the background working quietly with the industry. The cost of not getting that right will be immense.”
