5 Comments 5 CommentsIt has released its first monitoring report on sales and advice practises. The report covers advice given by AFAs, QFEs, brokers and custodians.
Its two main focuses within that are KiwiSaver and AFAs.
FMA director of regulation Liam Mason said most KiwiSaver providers were yet to go through the Financial Markets Conduct Act licensing process.
The FMA knew from its experience licensing DIMS providers that most would have to do some work to lift their standards on things such as governance and oversight. The regulator wanted to set out its expectations, he said. “Our expectations around how KiwiSaver is distributed are going up.”
Providers had an obligation to act in the best interests of clients throughout their KiwiSaver lifetimes, he said.
The report raised some concerns, particularly around KiwiSaver, but Mason said it was not part of any enforcement action at this stage.
He said there were no systemic issues but the report raised concerns that some consumers were not getting the advice and support they needed on KiwiSaver. There were also questions about how conflicts of interest were managed, especially around sales incentives and targets for QFE staff.
Improvements would be needed if providers were to be confident of meeting their FMCA conduct obligations, he said.
Mason said adviser regulation and other guidance messages directed at KiwiSaver providers had led to some becoming reluctant to offer personalised advice at all.
The FMA wanted to engage with them to tackle that, mindful that the Financial Advisers Act would address some of the same issues, he said.
The KiwiSaver providers who took part in the report would be briefed, including two who had a high percentage of transfers which were stopped. The FMA could offer no further information on those transfers.
Mason said only 0.3% of KiwiSaver sales and transfers were recorded as being conducted with personalised advice, which indicated a sales model rather than an advice model being applied.
The report was more positive about the behaviour of AFAs.
Mason said the FMA was largely happy with their willingness to meet the required standards.
He said that would have an impact on the level of future AFA monitoring because the FMA takes an approach of targeting the areas where it sees the most risk.
"In the small number of cases where we do not see a willingness to comply, we are taking this seriously. We are currently in the process of referring two AFAs to the Financial Advisers Disciplinary Committee."
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When 99.7% of KiwiSaver sales and transfers are done without personalised advice and indicates a sales model rather than an advice model I would expect a regulator whose job is to regulate would be immediately jumping on this very serious issue and issuing at least stern warnings (publicly to be effective)or better still stop actions or prosecutions.
The FMA has been talking about this very issue for a very long time now. Perhaps the individuals involved are worried about their next career move back into the industry they regulate??
The other double standard being applied is that as an individual AFA I will be required to sign away my rights to privacy when I renew my AFA status with the FMA (see the latest declaration you are required to sign) so that they have the luxury of getting personal information from "any person" to verify my character when QFEs' staff are exempt from this process altogether.
Come on FMA; get your bloody act together and be seen to be consistent, fair and working in the best interests of investors. None of the above shows you are not and consequently not fulfilling your charter.