GUEST COLUMNIST – KATRINA SHANKS
As the financial advice industry embraces the post-transitional period of the new financial advice regime, it’s crucial for us to anticipate the road ahead, writes Katrina Shanks of Financial Advice NZ…
Recently, Financial Advice NZ members heard from FMA’s Romil Ghelani and Dhasha Ratnayaka about the regulator’s approach and expectations for the sector, as part of our Bring in the Experts webinar series. It was one of the most informative sessions we have done on the subject, with plenty of interesting insights into how the FMA intends to manage the relationship with the advice industry.
If you haven’t watched it yet, you can find a recording of the webinar in the membership area of financialadvice.nz, in the meantime, here are some takeaways that stood out for me.
Advice sector by the numbers
As of 17 March 2023, the first day of the new regime, the financial advice sector comprised 2,500 Financial Advice Providers, 8,838 financial advisers, and nearly 12,000 nominated representatives.
The majority of these entities have 20 or fewer financial advisers, which highlights that – despite some expected consolidation – the majority of businesses operating in our industry is small-to-medium in size.
Looking at these numbers, I’m heartened to see the dedication and hard work of all FAPs who successfully went through the licensing process. This dynamic landscape, brimming with diverse businesses, showcases the tenacity of our sector, and serves as a reminder of the key role that quality financial advice plays in the lives of New Zealanders. And as we embark on this new chapter, let’s remember that our collective success depends on our ability to collaborate, innovate, and support each other.
FMA’s approach to oversight
Another key topic Romil and Dhasha talked us through was the FMA’s approach to oversight. Importantly, they confirmed that the regulator’s primary goal in the new regime is to support and educate advisers, ensuring this transition is as smooth as possible for everyone involved.
The FMA will continue to provide guidance, resources, and valuable information to help navigate the complexities of the new regulatory environment. This approach is an opportunity for us to cultivate a positive and cooperative relationship with the regulator. By continuing to promote transparency, open communication and collaboration, we can work together to ensure the best outcomes for clients.
…the regulator’s primary goal in the new regime is to support and educate advisers…
Also importantly, the FMA recognises the extent of the changes, and while in time they will raise their expectations, they aim to be supportive at this stage, allowing FAPs and advisers enough time to embed the new requirements in their businesses.
Monitoring visits
The FMA will engage in three types of monitoring visits:
- Planned
- Responsive
- Thematic
Romil and Dhasha emphasised that these visits are not intended to be investigations, but rather opportunities for learning and improvement. In other words, the regulator aims to work with advisers, not against them.
Monitoring visits will help the FMA better understand our sector and tailor their support accordingly. And for advisers and FAPs, they’re a chance to showcase their best practices and engage in constructive dialogue with the regulator.
To learn more about what to expect from monitoring visits, I welcome you to watch the recording of our webinar. Dhasha also provided real-life examples of best practices and issues the FMA has encountered so far.
Regulatory returns
In the spirit of gaining valuable insights into financial advice businesses and the sector as a whole, the FMA requires FAPs to file annual regulatory returns (standard condition 3).
The first return is due on 30 September 2024 for the period 1 July-30 June. Questions for regulatory returns include factual information about the business and other details that may have changed since the licence was granted. This will help the FMA monitor trends across the industry and focus their resources appropriately.
Once again, the regulator acknowledges that gathering accurate data may be challenging, so they won’t expect perfection in the first year. Of course, in time the bar will be raised, but I think this is a good reflection of the relationship-based, collaborative approach that the FMA is taking.
…in time the bar will be raised…
We will be delivering a webinar with the FMA on the 26 April – click for details. This is a page-turn webinar where they will go through their expectations on each section in the return. This is not to be missed as you have to start recording this information from 1 July this year.
The bottom line
With the new financial advice regime, compliance shifts from box-ticking exercise to principle-based legislation. The end goal is to reduce barriers for consumers to access quality advice, while also empowering advisers to tailor compliance processes to their businesses.
As the industry adapts to these changes, we welcome the FMA’s commitment to building strong relationships with the advice sector and strongly believe the new regime opened up opportunities to elevate the advice profession even further.
As for Financial Advice NZ, we will continue to support and promote the great work that our members are doing, day after day, across the country.
Here to help
Financial Advice NZ’s ever-growing library of webcasts are available in its members’ section.
Financial Advice NZ was founded with a single-minded purpose: to help New Zealanders, and New Zealand as a whole, be financially better off.