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Running a customer-centric business: how the FMA wants to see it done

In response to questions from advisers and insurers, the FMA has spelt out what it means to put customers front and centre of their businesses – a key requirement for compliance with the industry’s new conduct regime.

Wednesday, April 27th 2022, 6:00AM 15 Comments

by Jenni McManus

Claire Bolingford, the FMA’s director of banking and insurance, says focusing on customer and investor outcomes, rather than complying with specific rules, involves a major shift in mindset for the industry.

A good start is to exercise what she calls “an empathetic focus on the customer”, viewing everything from the customer’s perspective. This should happen during the planning and design, through to distribution of a product.

“It means thinking about the customer experience throughout the life-cycle of the product,” Bolingford says.  “It also means everyone in the business thinking like this, from the board and the executive through to frontline teams, and everybody in between. It is categorically not just the job of the conduct team, or the risk management team or the compliance team.

“It means asking whether the customer needs [a particular] product and helping them to make an informed decision. Do they understand what they are getting? It means people get the financial products and services they need and when they need them and [the products] do what people reasonably expect them to do.

“We want to see that shifts have been made, not only in mind but in all firm strategies.”

These themes are emerging in conduct regulation in other jurisdictions, Bolingford says. “Governments and the public are more likely to be expecting financial regulators to give greater emphasis to issues of equity and fairness.”

Focusing on outcomes means businesses can shape regulatory change in ways that work for both the business and its customers, she says. “But if you don’t grasp that opportunity, governments have the habit of reaching for more restrictive tools. Eventually, rules may be required to protect customers and they generally have less flexibility and proportionality about how they need to be complied with.”

Bolingford says the FMA has seen some good practices from firms, particularly in the later stages of the pandemic. “But we are also finding too often that when we ask firms how they can consider customer outcomes when changes are made, the response has not been thought through. This suggests it’s actually an after-thought.

“We do expect firms to be thinking about the customer upfront when any changes are made, communicating clearly to customers and, importantly, thinking innovatively about how to mitigate any adverse impacts the change could have.

“So, of a firm says a digitisation project would offer positive outcomes for customers, we’re disappointed when they can’t articulate to us what those actually are in practice.”  Some customers, particularly the vulnerable, may struggle to access digital services.

The FMA also wants boards to think proactively about what they need to understand to assure themselves customers are treated fairly.

“We want to see them constructively challenging management on what information is provided to them on culture, conduct and customer outcomes,” Bolingford says.

Tags: FMA

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Comments from our readers

On 27 April 2022 at 8:00 am Matron said:
Can you hear the sound of blood starting to boil out there in Adviserland?
On 27 April 2022 at 10:41 am valkyrie6 said:
What’s the point of regulating advice if Banks are making it harder for customers to seek independent advice from Mortgage Advisers?
As part of mortgage advisers “value add” to their clients and to provide them on going advice, Advisers normally contact their customers around the time that the clients fixed term loan rate is due to expiry, the adviser can with the customers permission receive and negotiate updated new interest rates current loan details including current repayments, loan amounts and current interest rates from the customers’ bank.
The adviser can then provide the clients independent advice having all information at hand so the customers can choose to make an informed decision around their mortgage lending going forward.
This is a very important decision being made which effects the customer’s future financial position.
Once the customers have discussed their options with their adviser the adviser can confirm a new loan structure, lock in a new interest up to 60 days out from the expiry date of the current fixed rate direct with the bank on behalf of the customer.
Normally any new interest rates provided are normally valid or held for a period (anywhere from 2 to 3 working days) as to give the customers time to make the important decisions and have the conversations.
So, under the new FMA regulations where the focus is on consumers getting more access to independent financial advice this described process sounds pretty good for the consumer and gives them choice and adequate time to make an informed decision, and if customers re fix with the existing bank. (Good client retention) they are not looking to re finance or move to another bank.
but ……
ASB was the first bank to change this process basically confirming that all new interest rates will be provided direct to the customers online, rates offer will be the best available to the customer so not negotiable and the new rates available will only be valid for one working day.
The feedback from some of ASB customers is that they feel stressed and pressured to lock in a new interest rate with no human advice around the rate /repayments being given and very little time to make an informed decision is causing anxiety and, in some cases, mistakes are being made where the wrong loan term has been locked in and now can’t be changed without potential breaks fees being charged.

ANZ have now also followed ASB and now only offer customers new interest rates directly online with no guarantee that the rates are valid for even one day.
ANZ have said the customers can talk to an adviser if they want to, but ANZ will no longer provide loan account details to the adviser, the customers will need to provide all their loan details to an adviser so they can get independent financial advice, have that discussion, make a decision and implement that decision back on their online backing themselves, all in less than one working day.
I understand that banks make commercial decisions to maximize net profits and having customers click online to re fix their mortgage is no doubt saving the banks money around staff wages (no more human contact) and adviser commissions, but what about the customer ?.
The question must be asked, so with the FMA so focused on better outcomes for bank customers and wanting more consumers to get independent advice, how can these banks go in the complete opposite direction pressuring customers to click a rate online with no advice whatsoever, cutting the time frame available for customers to even talk to their mortgage advisers and to make informed decisions.
One bank commented and said “this is what customers want “they don t want any advice around their mortgage lending, but I disagree, and I think the FMA would also disagree.
There will be a small portion of customers that are happy to click online with no advice whatsoever, but most mortgage borrowers absolutely do want to talk to some one and access advice and to not feel pressured into making a financial decision in an interest rate increasing marketplace.
Is this profit over service
On 27 April 2022 at 1:51 pm John Milner said:
I just love my "customer experience" from the FMA. Attempted to make a serious compliant via their website, only to find they have removed their complaint section.

Called the FMA and waited approximately 20 minutes to be told they couldn't transfer me to a particular staff member I had communicated to previously or anyone else for that matter.

It's little wonder the FMA is a revolving door with staff.

Earth to the FMA - take a look in the mirror.
On 27 April 2022 at 2:21 pm Amused said:
Dear FMA

You have stated that a key requirement for compliance with the industry’s new conduct regime is for banks, insurance companies and financial advisers to put customers the front and centre of their businesses.

Please explain then how you have allowed two main banks to introduce digital fixed rate roll over channels that can financially disadvantage their home loan customers?

As valkyrie6 notes correctly these two main banks are now pressuring their home loan customers into making an important financial decision within a very limited time frame. Instead of having 2 business days like they had previously customers now have to essentially decide on the spot how long to refix their home loan's repayments for. This greatly reduces the customer's ability to make an informed financial decision such as speaking to a mortgage adviser, family, friends and even their own partner. Most couples work 9-5 during the day.

These new online processes have also clearly been designed to limit the ability of home loan customers to shop around for a better deal i.e. refinance. Traditionally the big banks have always matched other main banks rates when customers refix thanks in part to a mortgage adviser's involvement. Banks no longer have to be super competitive though when they offer new rates directly to their customers online. No doubt this is currently saving them a tidy sum but the customer is now the one who is been financially disadvantaged.

Anyone who runs a business in New Zealand must comply with the Commerce Act which aims to promote competition in markets for the long-term benefit of consumers. How is a new online channel that pressures customers into staying with their current lender and is also no longer guaranteed to offer them competitive interest rates compliant with the Commerce Act?

If the FMA is truly focused on customer centric outcomes they need to show the banking industry quickly that they are serious about enforcing this principal. Otherwise the whole point of regulation becomes a farce with providers been held to a totally different standard than financial advisers.

Looking forward to seeing the FMA take action on the above soon.


New Zealand mortgage advisers acting in the best financial interests of their customers.
On 27 April 2022 at 7:56 pm Murray Weatherston said:
I can argue that advisers are the customers of the FMA with regard to the provision of regulated advice.
If I turned the same blowtorch onto the FMA and said “We do expect FMA to be thinking about the adviser upfront when any changes are made, communicating clearly to advisers and, importantly, thinking innovatively about how to mitigate any adverse impacts the change could have: what would be the verdict?

I need to take a stiff whisky and have a lie down after trying to understand what Claire Bolingford is saying above. It might as well be written in Swahili as far as I am concerned,
On 28 April 2022 at 6:58 am Pragmatic said:
I repeat my response to similar articles where I would encourage the FMA to spend at least a day in the life of an advisor to understand what they do, before making generalist statements about topics such as client-centricity. As readers will detect from the tone of the responses, these FMA observations are cavalier, often incorrect and inflammatory.
On 28 April 2022 at 1:31 pm gavin austin adviser business compliance said:
I 100% agree with the sentiments posted. Amused - you can still make a complaint but is bery difficult to find out how to on thier web page so here;s the link. I'd copy and paste your post on here as part of your complaint.
Good luck - your complaint will be ackonowledged and thats about it. You'll be unlikely to hear anything else the best you can hope for is that if enough advisers complainthen they may have a friendly chat with the banks concerned. Where is your industry body on this surely they would have concerns. Could be a good story for "Fair Go" and "Consumer (sic)"
On 28 April 2022 at 6:26 pm LNF said:
Not at all surprised

What talented young person starting their career has ever been heard to say "my ambition in life is to work for the Government"

Some years ago after 40 years I deregistered. I received a FMA letter last year saying I had received commission - please explain. My reply - "it is called renewal commission No advice involved"
On 28 April 2022 at 8:22 pm Murray Weatherston said:
I've made 3 complaints to FMA.

1. I was chairman of a Body Corporate. Our manager had a tame arrangement with a fire and general giant, so we insured through the giant. But we didnt get any disclosure statement from the F&G. They said they didn't need to disclose to us the insured. They said (but I never saw) they did a global disclosure to the BC Manager Co. I didn't think that was right so complained. Eventually FMA decided there was nothing to see here, move on.

2. I noticed unusual share trading in a highish profile new listing at at time when the price had tanked. After the close there was a relatively large trade at a price well above the close and also well above the range for the day. I would hypothesise it might have been an end of day pump possibly to prevent a margin call against borrowing to purchase earlier. Outcome - don't know.

3. On the first day of AIRRG (Air NZ rights) I thought FMA was reporting a false market. NZX wrongly adjusted the ex day's closing price - they calculated as 1 for 1 at 1.06 which led to a reported base for previous close at something like 116. The days open was much lower and NZX showed as a big drop from the day before.

Volume was fierce as the sharesies mob thought it was a great time to buy - buy the dips is always a winning strategy - Tui sarc. The proper adjustment was 2 for 1 at 53 cents a new share, which gave a theoretical 77 cents. The market was actually trading well in the green (the sharesies were paying much much more than the day before. I tried NZX and when they didnt seem to want to understand the issue. So I raised the same with FMA.Pretty much silence from them apartment from an acknowledgement that I had raised something and they would be looking into it.

I don't think I will ever bother again!
On 29 April 2022 at 2:27 pm w k said:
conclusion: sadly, this is the worst state of regulatory affairs in the financial sector in my 40 years in the industry. and there is absolute zero respect for financial advisers in nz.
On 30 April 2022 at 3:49 pm Murray Weatherston said:
Correction to my 28 April, item 3.
Should read
"3. On the first day of AIRRG (Air NZ rights) I thought NZX was reporting a false market"
Apologies to FMA. I reckon they get a lot wrong but not this - the initial error was NZX's. However my criticism that FMA appeared to do nothing about it when it was drawn to their attention still stands.

PS I have made this correction on my own motion. No one has complained to me about inaccuracy.
On 2 May 2022 at 6:25 pm LNF said:
The Association organisations who exist for their members interests are conspicuous by their silence
On 3 May 2022 at 5:04 pm Murray Weatherston said:
Plus ca change, plus c'est la meme chose.

PS can't get the site to accept French punctuation.
On 3 May 2022 at 6:12 pm LNF said:
On 3 May 2022 at 7:29 pm Murray Weatherston said:
I was supporting you. It is not only this issue on which "the Association organisations who exist for their members are [or have been] conspicuous by their silence.
The French translates broadly to "the more things change, the more they stay the same".
I couldn't type the phrase using all the French punctuation that I would have had to use not to be accused of typos if I was in France.

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AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.45 7.05 6.85
ANZ 8.64 7.99 7.49 7.35
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 7.39 6.89 6.75
ASB Bank 8.64 7.39 6.89 6.65
ASB Better Homes Top Up - - - 1.00
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BNZ - Classic - 7.29 6.85 6.65
BNZ - Green Home Loan top-ups - - - 1.00
BNZ - Mortgage One 8.69 - - -
BNZ - Rapid Repay 8.69 - - -
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CFML Loans 9.45 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - ▼7.09 - -
Co-operative Bank - Owner Occ 8.40 ▼7.29 6.89 6.75
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 ▼7.79 7.39 7.25
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
First Credit Union Standard 8.50 7.99 7.85 -
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Heartland Bank - Reverse Mortgage - - - -
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HSBC Premier 8.59 - - -
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 7.85 7.05 6.85 6.59
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Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 8.35 7.89 7.65
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Pepper Money Essential 8.29 - - -
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Lender Flt 1yr 2yr 3yr
Resimac - LVR < 90% 9.84 9.30 8.89 8.69
Resimac - Specialist Clear (Alt Doc) - - 8.99 -
Resimac - Specialist Clear (Full Doc) - - 9.49 -
SBS Bank 8.74 7.95 7.45 7.29
SBS Bank Special - 7.45 6.95 6.79
SBS Construction lending for FHB - - - -
SBS FirstHome Combo 6.19 7.05 - -
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TSB Special 8.64 7.39 6.75 6.75
Unity 8.64 6.99 6.85 -
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Wairarapa Building Society 8.60 7.15 6.85 -
Westpac 8.64 7.89 7.49 7.25
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - 7.29 6.89 6.65
Median 8.64 7.45 7.37 6.77

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