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FMA says monitoring isn't an audit or investigation

The Financial Markets Authority may select a financial advice provider (FAP) or person licenced to provide financial advice to provide responses as part of its role in monitoring the industry, the FMA's Crystal Burbery told LFG Group's conference in Christchurch last week.

Monday, June 19th 2023, 9:13AM 8 Comments

“If you do get selected for responsive monitoring, we will be checking that you are complying with all the rules,” Burbery said.

“It's not an investigation or an audit. It's more of an opportunity for us to understand your business,” she said.

“We want to understand how FAPs are complying and ensuring good customer outcomes.”

Until now, much of the FMA's focus has been focused on “getting everybody licenced”, which meant achieving Level 5 of the New Zealand Certificate in Financial Services.

But now the focus will shift to ensuring compliance.

Such monitoring will provide the FMA with information on areas in which it needs to provide better or more guidance to the market, Burbery said.

“But if we do see non-compliance or evidence of consumer harm, we will act,” she said.

Monitoring may involve an on-site visit or electronic interview and the FMA will want to see the FAP's business records so it can both monitor compliance and the suitability of the advice and service the FAP is providing.

It will include formal interviews with staff, either virtually or on site, for one to three days.

The FMA will then provide a “preliminary debrief” and then a final review of the outcome, usually within four to six weeks, “Burbery said.

“It's an opportunity for you to show us what you do.”

Good record keeping practices “are essential”, as is ensuring financial advice is suited to the needs of each particular client. The FMA will also want to see that advisers have good relationships with their clients, she said.

Problems with record keeping “consistently comes up in our reviews as an issue” and it involves more than just maintaining client files, Burbery said.

Advisers need their records to show how they are meeting their obligations and should be created in a timely manner and kept for at least seven years.

Failure to provide the FMA with such records “in a timely manner” can constitute a breach.

Tags: FMA

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Comments from our readers

On 20 June 2023 at 4:49 pm JPHale said:
Monitoring isn't an audit or investigation if the outcome of that monitoring is only going to produce discussions around areas of weakness and improvement.

Monitoring that can result in action directly due to non-compliance or consumer harm found is an audit or investigation.

Trying to dress up a monitoring visit as a catch-up and chat over tea and cucumber sandwiches is demonstrating a very low opinion of the intelligence level of the financial advice community!

If you believe the headline, then maybe you want to look at another career because the FMA has your number!
On 22 June 2023 at 11:57 am Good Hamish said:
It would make sense to start at looking at the industry through education through closer work with the complaints authorities. Otherwise the FMA stands to appear as they are on a witch hunt where they first need to define the witch, through the help of the possible future witches.
On 23 June 2023 at 1:42 pm w k said:
will be great if fma were to give a definition of a "good customer outcomes".

is that in fma point of view? or, is it from the experience or expectation of the customer?
On 24 June 2023 at 6:44 pm LNF said:
If the client or the clients have not given authorisation to disclose their details then the details must not be disclosed. No exceptions
On 30 June 2023 at 2:38 pm JPHale said:
LNF, you may want to read the various requirements of the law and FAP license, not to mention the content of agency agreements.

They all say the government can stomp over everything.

That said, yes, it is good practice to ensure that clients are aware that the information they provide is subject to regulatory and judicial disclosure.
On 30 June 2023 at 2:42 pm JPHale said:
W K, yeah, that old chestnut, one I started with back at the beginning, and no one has been able to define it.

Much like the idea that every expression of dissatisfaction is a complaint. I'm not logging every client complaining about premiums as a complaint; that's just part of the job.

The insurance company love letter reminding you you're getting old, and they can put the price up.

Good customer outcome? A client that's happy. Completely subjective to the client and has no reasonable control or influence by the adviser.

Got cancer and dying and didn't take enough life cover; that must be the adviser's fault and, by default, isn't a good customer outcome.

Where does the client's responsibility start with this?

Because the law states, we are responsible for the client understanding our advice. How exactly do we prove that one too?
On 4 July 2023 at 8:20 pm Steve Wright said:
JP. 'Good customer outcomes' can surely only be determined in the context of each specific client's individual circumstances, the advice given and the client decision on action to be taken.

I'd venture it must mean something like... the client 'gets what they wanted' (after making a reasonably informed decision based on suitable advice, recommendation, and, where necessary, suitable disclaimers, and 'warning' of outcomes, insufficiencies, or other potential dangers).

I don't think the concept of 'good customer outcome' (as I understand it in the current context of life and medical insurance) can mean the client must be 'happy'. A properly advised client who chooses to be underinsured or incorrectly insured, is unlikely to be 'happy' at claim time, but that is not reasonably the fault of the adviser!

I do agree the concept needs discussion and broad consensus, because the issues involved (in life and medical insurance advice anyway) are numerous, detailed and usually relatively complex.
On 7 July 2023 at 7:20 pm JPHale said:
Steve, that's the point. You can’t determine the good customer outcome, unless you look at the file at a client level.

That’s part of the problem with the statement as we are all looking at client level, but there’s nothing defined to assist us at an organisation level.

And because of this, we don’t have anything to link and measure organisational processes to link them back to defined good customer outcomes.

Which means for the majority of us, we are flying in the dark, hoping that what we’re doing is going to meet the requirementswhich means for the majority of us, we are flying in the dark, hoping that what we’re doing is going to meet the requirement

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