Advisers question whether churn still an issue
Advisers say the Financial Markets Authority is right to take action on any cases where policies are being replaced irresponsibly – but it’s unlikely to be widespread.
Thursday, February 19th 2026, 9:33AM 
4 Comments
At the recent Booster conference, FMA head of financial advice Romil Ghelani said the FMA expected that any situations where insurance policies were being replaced would include a thorough comparison of existing cover.
“You just must exercise care, diligence and skill and this simply means robust advice process and documentation. The duties and obligations under the FMC Act and Code are simply heightened when a policy is being replaced.
“Good examples we have seen include robust comparisons, using research tools and balancing the pros and cons so the client understands the trade-offs of replacement, and not just the pros.”
Ghelani said the FMA still had some concerns about potential churn.
“We are seeing, in a small number of cases, very reckless conduct for replacing policies. We will prioritise these cases, while most of what we receive are allegations, our internal risk assessment and evidence on hand usually determines our immediate next step.”
Mark Sheehan, chair of the Independent Financial Advisers Association, said he did not think there was a systemic problem.
“It’s a pretty small industry… I think it would become very apparent if there was systemic churning going on and I just don’t think it is.
There might be the odd example but it doesn’t seem to be as big a thing as it was 20 years ago.”
He said it was not bad that it was on the FMA’s radar. “Maybe there are some rogues out there. Distribution is so different now. You don’t have the bank channels as such, we have quite a lot of direct online stuff so perhaps that’s something going on in that space. But I think in terms of the independent adviser, the vast majority feels like they’re running pretty good operations.”
Tim Fairbrother, of Rival Wealth, said if there was any reckless replacement happening, it was a problem.
“With oversight from the insurers, there shouldn’t be anyone that feels they can do it or an insurer that allows it. The insurer should be acting as the gate keeper for inappropriate advice.
“It also needs to be taken with a grain of salt, as these are stated allegations. Advisers are very protective of their clients, as they should be as they put their heart and soul into helping them, and then when a new adviser comes along and makes changes to the advice that was supposed to be sound and fit for purpose, then that can hurt the ego if the client chooses new advice.
“I believe the FMA should be coming down exceptionally hard on the small number of cases they are seeing as this is where the problem lies.”
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Comments from our readers
Why are we imagining problems again? Why not deal with actual facts rather than imaginings.
I would like to hear Chatterbox's theories on this as well...
I would also love Mr Ghelani to do six months in the field as an adviser. If there is an actual problem, state it show us, talk to those who could be offending
The DRS case studies and recent cases do not show or reflect the imagined adviser harm (insurance-personal) that the FMA hallucinated at the start although Chatterbox may suggest they were hidden by the illuminati.
Um, no. There are plenty of operators that are not doing comparisons, and hopefully, they are stating this. This is the FMA's own industry guidance previously published!
“We are seeing, in a small number of cases, very reckless conduct for replacing policies. We will prioritise these cases, while most of what we receive are allegations, our internal risk assessment and evidence on hand usually determines our immediate next step.” - Ghelani
Good!
“With oversight from the insurers, there shouldn’t be anyone that feels they can do it or an insurer that allows it. The insurer should be acting as the gate keeper for inappropriate advice." - Tim
Yeah, no. Insurers have no idea what the advice situation might be as to suitability and client need.
Insurers demanding better justification of replacement would be a better approach. If the adviser can't justify it, then it shouldn't proceed. The problem is insurers' self-interest, with business flowing to them.
“I believe the FMA should be coming down exceptionally hard on the small number of cases they are seeing as this is where the problem lies.” - Tim
Agree!
The report (“Review of Retail Life Insurance Advice”, 2015) was commissioned and funded by the FSC and its insurance members, and the terms of reference were to “specifically address the cost of “churning” to the Public of New Zealand, the impact of high commissions and identify solutions including a transition path likely to have wide support amongst stakeholders”.
The disclaimer to the report makes it clear that the report was an own goal: It did not fit the narrative the FSC members were hoping to craft. Being favourably cited in the Executive Summary of the FMA’s 2016 report on replacement business confirms it was, indeed, an own goal.
The report contains several recommendations, and it is interesting to read it 10 years later and appreciate the extent to which those recommendations have gradually been implemented (primarily through FSLAB and COFI). One recommendation that has not yet been implemented is: Introduce an industry wide replacement policy process.
The FMCA provides that regulations may be made to require “a thing to be done in a prescribed manner” in respect to a provision of the Act. There is room for prescriptivity in a principles-based regime, and standardising replacement business advice has got to be a win for consumers, advisers/FAPs, and the regulator. It might even be fair for insurers (when viewed as a group).
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