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FMA won't be 'outgunned' despite broader remit

The Financial Markets Authority wants to work collaboratively with the investment community this year, but warned “we will not be out-gunned,” despite its wider remit.

Wednesday, February 5th 2020, 6:01AM 5 Comments

by BusinessDesk

Chief executive Rob Everett outlined the markets conduct regulator's main focus for the year at a Financial Services Council breakfast event with some 200 attendees. Those areas include the new financial advisers regime, scrutiny of investment products branded green and continued work on KiwiSaver schemes, according to his speech notes.

The FMA, alongside the Reserve Bank, published critical reports of banks and life insurers in November 2018 and January 2019, after examples of misbehaviour across the Tasman raised fears there might be similar issues in New Zealand.

Everett said while he was “surprised, disappointed and, occasionally, downright frustrated at parts of the industry,” he wanted to offer the carrot and not just the stick.

“For sustainable change within the retail financial services industry, that change must be chosen rather than imposed,” he said.

“I accept the line between the two might feel narrow at times. But I am confident from my conversations with those running the banks, the insurers, the fund managers and with financial advisers, that common goals can be found.”

At the same time, Everett pointed out the FMA’s litigation budget has been tripled to $6 million this year, adding that the regulator will continue to get busier.

The agency is due for another funding review and, with support from the Ministry of Business, Innovation and Employment, has put forward a number of options to assist its expanding remit.

A consultation paper published Jan. 28 identified three funding scenarios: the current spend model at $45.2 million, the base case model at $56.1 million and an enhanced case at $60.8 million per year. In the 2018/19 year the agency received $37.1 million in funding.

The paper also called for feedback on whether this increase should be paid for by levies alone or for Crown funding to also be used.

Submissions close on Feb. 28.

Tags: AFA

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Comments from our readers

On 5 February 2020 at 8:16 am Pragmatic said:
Whilst the "only Club in town to belong to" for the industry is the FMA, I would encourage the Regulator to remain sensitive to the actual costs of participation when determining a fair levy.

The industry will continue to come under heightened fee pressures (exacerbated by an inevitable normalizing of equity markets, and the release of the property bubble) which will put pressures on the revenues of all participants - especially those who dispense advice. It is also worth noting that the NZ industry is a cottage-industry (ie: extremely relationship centric) that is fragmented both geographically and culturally - making it challenging for dispensers of advice to really benefit from nationwide economies of scale.

The 'butterfly effect' from an over-burdened financial services industry (both from a Regulatory & cost perspective) will result in a homogeneous outcome for consumers, and/or the inability for consumers to attain independent advice. No one wins out of these scenarios.
On 6 February 2020 at 10:32 am gavin austin adviser business compliance said:
Excellent comments Pragmatic– any approach by the Regulator needs to be done in such a way that reflect the size and complexity (or lack thereof) of the Advice Business/Adviser they are dealing with. The message they’re trying to convey is “take compliance seriously – don’t pay it lip service” (my interpretation).

There are some commentators lately that in my view are over complicating the issues as they see them (sometimes from a view that has not interpreted the application of the Act correctly. At least that’s what the FMA told me last time I had a conversation with them.

One commentator (no names, they know who I’m referring to) has been spoken to by FMA relating to what they felt was misinformation that was creating unnecessary concerns in the adviser community. Some comments recently about Wealth Point are a good example.
On 9 February 2020 at 5:25 pm Murray Weatherston said:
Don't know if you realise this but your second and third paragraphs cast adverse aspersions against some 6 to 10 other commentators on the Wealthpoint story.
Someone sent me an email asking if you were referring to me and I will tell all readers here the same thing I told them. "I don't think you could have been referring to me because I haven't had any contact with FMA in 2020."
Its no wonder advisers have been done over in the current regime change - as well as competing with regulators and institutions, we have to compete against some in the adviser camp.
I am sure Pragmatic is right in his contribution on another story that officials want to see fewer larger FAPs - transitional licensing looks likely to result in 2000-2500 licences. If Pragmatic is correct, some 90 to 95% of them will have to be weeded out over the next 2 years unless the outcome has to be described as an "unintended consequence"
On 10 February 2020 at 10:46 am gavin austin adviser business compliance said:
Murray you are correct up to a point - I I said one commenator and that thye would know who I was refering to. I could make the name public if you'd prefer but would rather not - FMA have confirmed that there has been a lot of misinformation out there to the point where I made a call to them and named the person. There comment to me was that they agreed but not to worry they had already spoken to the person concerned. Rather than express uninformed opinions masybe the person could send FMA a question via the website - I'm sure they'll answer. I know they always have for me when I sort some clarity.
On 10 February 2020 at 1:23 pm Tash said:
Why does anyone genuinely interestsed in providing a professional service think that being your own FAP will be more onerous than reporting to a FAP (aside from some initial work required)?

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