Do you agree with the FMA’s focus on monitoring the advice sector given it continues to receive reports of misconduct which it says are motivated by high upfront commissions?
- No (62%)
- Yes (30%)
- Not sure (8%)
Loading ...Our poll this week centres around the FMA’s latest Financial Conduct Report and seeks to understand if advisers agree with the regulator monitoring the advice sector given the FMA continues to receive reports of misconduct, which it says are motivated by high upfront commissions.
The report sets out the FMA’s regulatory priorities for the 2026-27 financial year which include this focus on managing conflicts from remuneration structures in the financial advice sector (see: Risk Commissions Under Regulator’s Spotlight) along with fraud detection and prevention; use of complaints data to drive improvements; and digitisation opportunities (such as AI) in financial advice.
With regard to managing conflicts from remuneration structures, the FMA says it’ll focus on “…ensuring financial advice providers have effective processes and controls in place to manage conflicts of interest arising from commissions, and to detect and deter misconduct that may be incentivised by commission-based relationships.”
It says this includes misconduct arising from both upfront commissions and ongoing commissions.
…We continue to receive reports of misconduct motivated by high upfront commissions…
As to why it has this remuneration focus, the FMA report states many FAPs and financial advisers are remunerated by commissions and while it recognises that commission-based models can improve access to advice, these carry risks for consumers that need to be managed.
“The financial advice regulatory regime provides the framework to ensure clients’ interests are prioritised, but we continue to receive reports of misconduct motivated by high upfront commissions.“
It’s aware of instances of unmanaged conflicts leading to poor or unsuitable advice, inappropriate replacement business and fraudulent activity.
The FMA also says it’s aware “…of high upfront commissions for financial advice across life, health and disability insurance products, and KiwiSaver, which increase the risk of consumer harm. We also see inconsistencies in how advisers disclose ongoing (servicing) commissions.”
This latest poll, which follows hot on the heels of our previous poll looking at soft commissions in the life sector, is now seeking to canvas advisers’ views on this new FMA focus.
Do you see a need for the regulator to monitor the management of risk commissions in light of these reports of misconduct? We are keen to learn your views and will report back next week…