News that the FMA believes some FAPs take what seems to be ‘overly conservative’ approaches to meeting their regulatory obligations attracted strong reader interest this week…

The FMA has told an industry audience it believes some Financial Advice Providers take what seems to the regulator to be “…overly conservative approaches to meeting their regulatory obligations.”

This perspective was shared by FMA chief, Samantha Barrass, at an Outlook 2025 event hosted by the FSC earlier this week. Barrass was highlighting this issue within the context of the FMA’s focus in 2025 on what its compliance mandates are actually achieving.

Speaking to the 300 attendees at the event, Barrass says the FMA will want to understand the reasons for this conservative approach “…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.

Samantha Barrass, CEO of the FMA.
Samantha Barrass.

“In these cases, our 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.”

…we cannot simply regulate for the sake of regulating…

In a wide-ranging address Barrass highlighted that the FMA approaches its role “with the underlying philosophy that we cannot simply regulate for the sake of regulating. We are constantly considering whether it passes the ‘so what’ test.”

In a nutshell “…it’s about focusing on the things that matter. That is, thinking about the end results we want to achieve and ensuring the work we do reflects that.”

Barrass says while this has already been its approach to some sectors over the past year, in 2025 it will step up this approach in a way where the sector should see a tangible difference.

As to what are the things that matter she pointed to:

  • As a financial conduct regulator, we are of course focused on making sure that consumers and investors are rightly confident that firms will treat them fairly
  • Closely intertwined with this is our overarching statutory objective of fair, efficient, and transparent financial markets
  • We also want to ensure our 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

Pilot Regulatory Sandbox

Barrass says the focus on the things that matter extends beyond just monitoring and supervisory relationships and it’s also applying this focus to the wider work it does to support innovation and growth, highlighting the launch of a pilot regulatory sandbox in December.

“Sandboxes allows us to partner with firms to test innovative products, services or business models. Sandboxes can help spur and incubate innovation by allowing both startups and established firms to test new products and services in a controlled environment.”

Barrass says the FMA has received 14 expressions of interest already and has been impressed by the quality and breadth of the applications.

The regulator is undertaking the sandbox in two cohorts and is in the final stages of confirming the first round of successful applicants, which will be announced in the coming weeks.

The CoFI Regime

She also noted the CoFI regime comes into force at the end of next month and paid tribute all the hard work both within firms, and the FMA’s licensing and frontline supervision teams.

“ Everything is currently on track, with 67 licences issued to date.”

…we will be looking at firms where there has been limited or no-self reporting in the past…

She later noted that as the FMA commences CoFI supervisory work from April “…we will be looking at firms where there has been limited or no-self reporting in the past. A particular area of interest will be around the fact and content of regular product reviews. These reviews are all the more important when we consider how customers may have been disadvantaged over long periods of time when reviews are not undertaken.”

In her address she also touched on the passage of the Contracts of Insurance Act last year.

“We will start to engage with industry, ahead of commencement, around how we can work collaboratively for the benefit of consumers. This includes supporting their customers to understand what the changes mean for them.

Barrass also highlighted a new publication to be published midway through the year, called the Financial Conduct Report which “…provides an opportunity to consider risks to consumers, investors and markets posed by conduct in the sectors we regulate.

“The report will highlight key conduct issues and how we have responded, as well as showcasing good practices across the industry. It will provide a forward-looking view of the key risks on the FMA’s radar, so you better understand our regulatory priorities and what to expect from us,” she says.