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FMA finalises document for regulatory returns

The Financial Markets Authority (FMA) has finalised the document it will use for advisers to complete their annual regulatory returns.

Thursday, February 16th 2023, 7:37AM 5 Comments

by Eric Frykberg

These are required under the Financial Markets Conduct Act of 2013 (FMC), which was folded into the Financial Services Legislation Amendment Act 2019 (FSLAA) which set up the FAP regime.

The FMA says it will use the information it gets back to monitor licence holders’ continuing ability to effectively perform their role of giving financial advice.

The first regulatory returns will cover the year from July 1 2023 to June 30 2024, and must be supplied to the authority by September 30 2024.

The information on these returns will cover the nature, size and complexity of a FAP service.

In producing this form, the FMA said it carefully considered industry feedback. As a result, it reduced the number of questions in the final document and refined others.

The final set of questions cover a range of topics, such as how long a provider has been in business, how many advisers work in that business, what is their level of skill or training and how many retail or wholesale clients they have.

Other sections will look at the size of funds under management or the types of financial products being offered. The forms will also look at the issues of vulnerable clients, advertising and how complaints are handled. Outsourcing will be considered, along with business continuity and cyber security.

All this information can be found on the FMA website here:

The FMA said the data it gets back will help it monitor licence holders' capability to effectively perform the financial advice service according to applicable eligibility criteria.

It would include annually updated information and would use dynamic reporting, with FAPs only needing to answer questions relevant to their licence class and the financial advice services they provide. This would avoid a ‘one size-fits-all’ approach.

The FMA's Executive Director for Regulatory Delivery, Clare Bolingford, said these returns would help target resources efficiently to identify areas with the highest potential risk of harming consumers.

“We will take a reasonable approach,” she said.

“We will engage with the sector to provide guidance and expectations for completing the first regulatory returns.

“We expect that in subsequent years, FAPs will provide increasingly more accurate answers as their processes mature.”

Tags: FMA

« Australian rules an “impediment” to giving financial advice – reportTough times ahead for NZ economy: Nikko economist »

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Comments from our readers

On 19 September 2023 at 5:14 pm JPHale said:
I have a question... Yeah, possibly not what is intended, but well, let's start a fire!

I've had a look at the regulatory return for class 1; I'm assuming it's the same for the other two, and the criteria defined for replacement business has me thinking, will anyone ever report more than 0% replacement? Yes, zero...

Yes, I am being mischievous with intent!

This guidance statement in the returns questions document has me thinking...

"The time period within which the replacement business is counted should be when the recommended policy commences."

I don't know about you, but the best practice in policy change and replacement is you don't get rid of the old one before the new one is in place. You don't leave the client with gaps.

If the new policy (the recommended policy) is issued, then at that point in time (the day it commences; refer to my prior discussion on commencement dates for more confusion), the recommended policy is not a replacement. The recommended policy is an increase.

It is an increase because the original policy (the one intended to be cancelled) is still in place unchanged, and the new policy is now in place in addition to the original policy.

It's going to be another 7-10 days before the old policy is cancelled between the client signing things and the insurer processing things.

Now, another point, one the insurers figured out a long long time ago. Policy-to-policy replacement isn't replacement if only some benefits move. Say you move $90,000 Life cover from a $100,000 policy to a new policy with a different provider. The old policy is still inforce with $10,000 of cover and the new policy has $90,000. On a policy-to-policy basis, nothing has been replaced.

I appreciate this is playing games with the intent of the reporting; I also know from past observations of advisers utilising provider rules for their advantage that it will happen here, too.

Insurance advisers are used to dealing with specifics of contracts at a level most people never consider; when there is wording presented that is open to interpretation, it will be interpreted vastly differently from how it was intended.

After that epistle, who's completing the current return questions with anything other than 0% replacement?
On 22 September 2023 at 10:32 am Murray Weatherston said:
I wonder how long it will take for someone from the FMA cpmes calling to re-educate you.
IMO you are being too cute for no obvious purpose.
On 22 September 2023 at 1:24 pm JPHale said:
@Murray, you know as well as I do, when this stuff is poorly worded, only the ones trying to get it right are going to answer it as intended.

The ones that should be answering it are going to duck and dive on the semantics of the wording so they don't appear on what is clearly a fishing document to determine who to target.

And when they are finally caught up with, by data from other sources, they will point at the documents and state they answered them as they were requested, and they can't be pursued on just the intent piece alone for those returns.

And we have all seen this in the past, and history has a funny way of repeating...
On 22 September 2023 at 3:05 pm henry dupont said:
JP I am a fan of when you take a trip down the weeds and your attention to detail is to be commended. None of us are perfect but at times you seem miss the strategic intent or big picture such as with PL price rises where you said others would follow then changed your mind and said PL were reverting to mean.

The Koolaid comments about you are not fair but I with your comments here you have done yourself no favours.

Keep up the other work though.

On 22 September 2023 at 3:13 pm rob howell said:
Usually like you getting into the weeds JP

Reads like you have jumped the shark on this one though.

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