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Report on NZ advisers sparks ‘strong action’ warning

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A Financial Markets Authority (FMA) report on New Zealand’s financial advice sector has found weaknesses in areas such as conduct and culture, prompting the regulator to warn it would take “increasingly strong action” against those who fail to remedy the problems.

The other areas in need of improvement are governance and oversight, compliance assurance programs plus compliance and controls.

“We are at a point now where the volume of FMA guidance, level of engagement and maturity of the regulatory regime mean there are no excuses for conduct that presents the risk of harm to investors, customers and the integrity of the markets,” CEO Rob Everett said.

“Where we identify significant breaches of the rules, or where entities do not address our recommendations in an appropriate or timely manner, we may take further action.

“I anticipate this action will be increasingly strong.”

Mr Everett says the FMA has observed good progress overall by the industry, but the attitudes of a few firms suggested “they saw good conduct as something that only needs to be demonstrated when we visit”.

“This is not a box-ticking exercise. It needs to be woven into the culture of providers.”

The report, based on monitoring engagements, complaints and other information received from January 2019 to June this year, focuses on adverse findings with the aim of highlighting areas in need of further action.

Many financial advice providers were covered in the report, including authorised financial advisers and qualifying financial entities.

The FMA has described as disappointing the findings on financial advisers and qualifying financial entities.

While many of them have invested significant effort in complying with the legislation, several had lapses in the way adviser business statements were prepared. Some statements were filled with incorrect information, and in other cases sufficient details about processes and responsibilities were missing.

A number of them also did not meet their customer disclosure requirements. They only provided disclosure on request, rather than in interactions as is the obligation.

“When customers make decisions based on incomplete information, they may experience poor outcomes,” the report says. “Customers need to be given disclosure about products and services in a way that does not conceal or complicate the information.”

Click here for the report.