4 Comments 4 Commentsby Susan Edmunds
The Australian Securities and Investments Commission said tied financial advisers in that country were acting outside their clients’ best interests as much as 75% of the time when they recommended they shift to their employer’s products.
One in 10 clients were said to be left in a significantly worse financial position because of it.
The review focused on products offered by CBA, Westpac, ANZ, NAB and AMP.
A spokesman for the FMA in New Zealand said conflicted conduct was a key risk and one of its strategic priorities.
“That’s why we’re undertaking work to look at how conflicts of interest are being managed in New Zealand," he said.
In its annual corporate plan, it sets out that firms should have conflict-management procedures designed to put customer interests first.
It said that in 2017 only one of 33 financial service providers reviewed had measures set out in its licence application to manage the risk of conflicted conduct adequately.
“The work is focused on vertically integrated firms and conflicted business models. It looks at incentives and sales process, as well as conflict management policies and procedures.”
New financial advice rules to be introduced by the Financial Services Legislation Amendment Bill (FSLAB) will apply a duty to give priority to client interests to all retail financial advisers for the first time.
New Zealand Bankers’ Association chief executive Karen Scott-Howman said banks worked to ensure their customers' interests were considered first "in everything they do", so customers can make well-informed decisions.
“Well-informed customers are better placed to make borrowing and investment decisions. It’s also about increasing financial capability. Simply put, well-informed customers make great customers," she said.
“The sale of financial products is governed by the Financial Advisers Act and the Financial Markets Conduct Act. Banks take their obligations under the legislation very seriously. They have robust processes in place to ensure they meet their consumer and regulatory obligations.
“For example, under the Financial Advisers Act, bank financial advisers must exercise reasonable care, diligence and skill. That means they have to assess how the product meets the customer’s needs. It also means they need to explain how the product or service works, and any limitations the customer should be aware of.”
She said FSLAB would build on these rules to include more explicit customer-first obligations for financial advisers. "This means advisers putting customer interests ahead of their own, regardless of their financial incentives and sales targets. We support this approach and are working closely with officials to help ensure a practical way of achieving this aim.”
| « Client-first rule softened - why? | Mann on a mission to diversify financial advice » |
Special Offers
Sign In to add your comment
© Copyright 1997-2024 Tarawera Publishing Ltd. All Rights Reserved
"This means (bank) advisers putting customer interests ahead of their own, regardless of their financial incentives and sales targets. We support this approach and are working closely with officials to help ensure a practical way of achieving this aim.”
This is the direct opposite of how banks operate today.
The daily sales meetings are about the numbers and only the numbers. They're on a grid. You say how much new FUM you've got in.
The problem is the senior sales managers, paid $200K+ are not interested in any other narrative. They are there to get the sales. They are skilled people that can apply their talent to any sales force, selling anything.
But they do not belong in wealth management or financial advice because they do not understand (or want to understand) the whole wide world of professional financial advice.
It looks like their days are numbered though. Once the heat intensifies, the ELT will distance themselves from this culture and will dismiss them as ruthlessly as they would put down a farm dog that is surplus to requirements.