The conduct journey may have been “hard yards” for New Zealand’s financial advice sector, according to FMA chief executive Rob Everett, but the regulatory process will also result in long-term business benefits - something the Financial Services Council believes is going to be the ‘silver lining’ for advisers, once the process is complete.
Advisers completed the transitional licensing process in March of this year, and most are now looking at starting the full licensing journey, which will be complete by 2023.
FSC CEO Richard Klipin said that the process will be a great opportunity for advisers to re-evaluate how their businesses are running, to make improvements, and to strengthen the focus on customers - all of which will yield longer term benefits. He said that while the regulatory overhaul is certainly difficult and requires time, resources and significant investment, the results will go beyond just being compliant from a regulatory standpoint.
“The process of getting a new license is actually an opportunity for advisers to rethink their business model, their typical clients, their pricing structure, and other aspects of the business,” Klipin said.
“So, in many ways, it opens the door to a number of other strategic questions for businesses, and we’re encouraging them to focus on the kind of business that they want to have in the longer term - not necessarily just in 2022/23 while dealing with a regulatory hurdle.”
“I do think that this will be the silver lining in all of this,” he said.
“It’s driving businesses and business owners to really think those things through, and I think that’s a really good thing. One of the ways that the broader financial services community can help advisers is by framing those questions, helping them with their thinking, and then helping them to implement that.”
Klipin acknowledged that the current outbreak of COVID-19 across Auckland and other parts of the North Island is undoubtedly challenging, and conducting an in-depth review and overhaul of business practices will only be adding pressure.
However, he said that the time of thinking about it as a ‘regulatory burden’ has now passed, and the key to moving successfully into the new regime will be having the right mindset - particularly in terms of how the changes can help boost efficiency, as well as the profile and reputation of the business.
“The ‘regulatory burden’ has been a consistent theme - there is more to do, there’s more oversight and more requirements, and the costs of not doing it are high,” Klipin said.
“All of that is true, but the system is changing after a long and thorough review. People have had the chance to have their say, and now we’re at the end point of actually doing things.”
“It is clear that business processes and practices will need to change, and for some people, that will be an opportunity to automate and use technology, or to rethink their process,” he added.
“Others will struggle with it because it is more time, energy, costs and money. But for business owners and advisers who are thinking in the long-term, it’s about thinking about how you can use all this regulatory change to improve your business, and get better outcomes for your clients while knowing that it’s going to be hard work.”
While reflecting on the overhaul of the financial services industry at the FSC’s recent ReGenerations Reimagined conference, outgoing FMA CEO Rob Everett said that while the conduct journey in New Zealand is well underway, it is still “no more than halfway there.”
He said that the Australian Royal Commission had thrown light on some “outrageous” practices across the ditch, and while he does not think that this kind of misconduct is prevalent in New Zealand, it was important to create an environment where it could not happen easily.
“I have to say that while now in late 2021 I am confident in saying that real progress has been made, it has not been easy,” Everett said.
“As those who read our report into general insurance recently, we continue to be affronted at instances where we see how little boards and senior management actually do until the FMA is at their door.”
“But we also see advisers, insurers, fundies and banks striving to serve customers during times of need and working hard to meet our expectations,” he said.
“The industry in New Zealand will flourish if it remembers who it serves - that is every man, woman and child in New Zealand. Our economy cannot thrive without confidence that financial products and investments are offered and sold honestly and fairly.”
