The FMA is cautioning advisers that research tools are most effective when used as part of a broader, holistic advice process.
In its latest Financial Advisers Update the FMA includes a ‘spotlight’ on using research tools in the advice process.
The authority says research tools “…play a valuable role in helping advisers assess and compare financial products. These tools can offer insights into product performance, risk and suitability, to inform reasonable grounds for financial advice and support decision-making.”
It notes that some research tools provide ratings or rankings for products.
“While this can be helpful, it’s important to remember it should not replace professional judgement. Advisers should continue to apply their expertise and consider the unique circumstances, goals and needs of each client,” the update says.
…Over-reliance on automated outputs or product ratings can lead to advice that may not be appropriate…
“Over-reliance on automated outputs or product ratings can lead to advice that may not be appropriate or in the client’s best interests.”
The FMA says research tools are most effective when used as part of a broader, holistic advice process.
“The appropriate use of such tools depends on the nature and scope of the advice being provided.
“By combining robust research with sound professional judgement, advisers can ensure they have reasonable grounds when giving financial advice – supporting better long-term outcomes and maintaining the integrity of the advice process,” it says.
Click here to see the full FMA Financial Advisers Update.