FMA Urges Advisers to Read its Monitoring Report


The first Financial Advice Provider Monitoring Insights report shows that some FAPs and advisers have a limited understanding of the purpose and intent of the regulatory regime.

Based on 60 visits covering sole advisers to large providers, with a combined client base of more than 350,000, the report is being recommended as required reading by FMA Director of Deposit Taking, Insurance and Advice, Michael Hewes.
FMA Monitoring insights report. cover.

He wants FAPs and advisers to reflect on where their peers are doing well, and where there are gaps or weaknesses.

“In some of the worst cases where we saw client harm, this has led to formal regulatory intervention, including public censures,” says Hewes.

“Where compliance was either poor or complacent, the FAPs ran the risk of delivering poor outcomes for their clients.

“Some FAPs also had a limited understanding of the purpose and intent of the regime and took a ‘tick box’ approach, rather than looking at how their arrangements can achieve good client outcomes.”

Some FAPs also had a limited understanding of the purpose and intent of the regime…

Nevertheless, Hewes says the FMA is “generally encouraged” by the way licensed FAPs have made progress under the new regime, which has been fully in place since transitional licensing ended on 17 Match 2023.

Michael Hewes, FMA's Director – Deposit Taking, Insurance and Advice.
Michael Hewes…Some FAPs have a limited understanding of the new regulatory regime.

“The FMA found those FAPs showing an understanding of their obligations were able to deliver on the regime’s purpose to support their clients’ interests,” says Hewes.

The report shows that while many advisers used tools or checklists, including external tools, to help give suitable advice, some were unable to demonstrate reasonable grounds to ensure their advice was suitable to their clients.

In some cases, FMA staff noted advisers switched a client to a product provider that paid higher levels of commission, without demonstrating how they prioritised the clients’ interest.

Nick Hakes, CEO Financial Advice NZ, says the report supports his view that there are many advice businesses successfully operating under the new regulations and operating as the Code of Professional Conduct intended “…which ultimately delivers better consumer outcomes”.

He says: “We look forward to ongoing dialogue and collaboration with the Financial Markets Authority, and we will continue to work with Financial Advice Providers across the industry to improve standards which elevate the understanding and perceptions of financial advice. In doing so, it will make a positive contribution to New Zealand’s future prosperity.”