The guidance for the intermediated distribution of financial products in New Zealand, while informed by discussions and a consultation with financial institutions and intermediaries, continues to draw comments from industry stakeholders. Craig Winterburn (pictured), chief executive of Kiwi adviser group SHARE & Newpark, is among those who have weighed in on the guidance note recently published by the Financial Markets Authority (FMA) – Te Mana Tātai Hokohoko.
When the guidance was released, the regulator said: “Intermediaries that provide financial advice are required to be licensed by the FMA as a financial advice provider (FAP) or operate under a FAP licence. These intermediaries are subject to their own set of conduct duties under the financial advice regime in subpart 5A of Part 6 of the FMC Act (FMCA) and must comply with the Code of Professional Conduct.
“Both CoFI (Conduct of Financial Institutions) and the financial advice regime require consumer interests to be considered in relation to the distribution of products and services. Ultimately, the FMA considers the CoFI and financial advice regimes are complementary, with broadly consistent overarching policy objectives. The policy intention is that the dual regimes create a shared responsibility between financial institutions and FAP-licensed intermediaries for fair treatment and outcomes for consumers.”
Commenting on the guidance note, Winterburn told Insurance Business: “We appreciate an acknowledgement that we, as financial intermediaries, are subject to our own set of conduct duties through FMCA and the Code of Professional Conduct and that, as a belts and braces approach, the two pieces of regulation strengthened the focus on fair treatment and better outcomes for customers.
“We also welcome the notion of ‘fair treatment’ as a shared responsibility between financial institutions and financial intermediaries, which we hope encourages real collaboration in this space across the sector.”
Melanie Gorham, CEO of the Insurance Brokers Association of New Zealand, had a different view on the idea of a ‘shared responsibility’ between insurers and advisers.
In a recent interview with Insurance Business, Gorham said: “We were quite concerned at the FMA stating that they called it a shared obligation. So, in our submission, we made the point that while both the intermediaries and the financial institutions, or the insurers [in our case], have conduct obligations, they come under different legislation. There are some quite significant differences.”
Additionally, Gorham cited “a duplication of oversight” – something her camp continues to be apprehensive about.
Winterburn, meanwhile, while having concerns himself, found certain portions of the guidance encouraging and considered particular sections as areas where there might be opportunities, such as in finding a mutually beneficial approach to data collection.
“It is encouraging that the roles and responsibilities of financial institutions and intermediaries in respect to engaging with customers are clearly defined,” he said. “This should assist in decluttering how we communicate with customers and enhance customers’ understanding of what products and services they have.
“[We’re also] comfortable with FCP (fair conduct programme) process and controls being built into distribution agreements. The only concern would be the need to work together on pragmatic and cost-effective ways for us, as intermediaries, providing compliance confirmations to financial institutions. The costs of compliance for licensed FAPs are increasing significantly, especially with some financial institutions insisting on external/independent audits each year.”
In terms of audits and reviews when it comes to FCPs, the last thing Winterburn wants is added requirements and costs.
“We hope financial institutions will be conscious of our already established accountabilities under FMCA and our FAP obligations – for example, the new regulatory returns that we are responsible for from July 2024,” the SHARE boss told Insurance Business.
“We wouldn’t want to see institutions unnecessarily adding more requirements and subsequently more cost on intermediaries based on their CoFI obligations. We support the regulators endorsing a risk-based approach to audits, acknowledging the maturity of the FAPs’ governance and compliance framework.
“This could be a great opportunity for the financial institution’s field-based staff to take a proactive approach and work directly with adviser practices to address FCP issues and provide guidance as required.”
The FMA, under the CoFI regime, is now accepting applications for financial institution licences.
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