Summit to examine financial advice policy, regulation, and professional standards

My comments are not directed to anyone in this article.

I’m a little over hearing constantly, about how many people don’t seek financial advice in NZ.

I have maintained for a very long time that NZ is a very expensive place to live.
Between 2010 and 2022 NZ had one of the biggest increases in housing costs according to the OECD Affordable Housing reports – around 75% while mean disposable incomes only increased 48%.
As the Retirement Commission has stated, a significant number of enrolled KiwiSaver members are not contributing. These two alone point to financial strain.

I have friends overseas (primarily U.S. and Australia), we do non scientific comparisons on costs of goods and services, based on incomes in our respective lands. There is no denying stuff generally costs a lot more here, particularly the basics.

I think the reality is, a lot of people in Godzone, are simply trying to survive financially, trying to make ends meet, let alone thinking about seeking out, and paying for, financial advice. As advisers, our views will be skewed on this as we tend to deal with those who can afford it, those at the higher end of the food chain, so to speak.

I wouldn't place too much weight on the headline figure of 28% (of NZers who accessed financial advice last year).

There is a massive disconnect between the definition of financial advice under the FMCA, and ordinary usage, a fact the authors of the Consumer Research Findings report point out (page 12, footnote 1).

As for the 63% who think about their financial situation weekly - the most likely advice they require is budgeting advice. They're worrying about the kinds of things Eyeinthesky mentions.

And sure enough, budgeting (at 55%) tops the list of what consumers think a financial adviser can help with.

I very much agree with Paul and Eyeinthesky and looking at the countries attending the regulations will vary considerably. There could be tax incentives, combinations of products combining savings and investments and also incentivised sales teams working with one provider.

In addition, just listen to all the noise in NZ around KiwiSavers, banks, lenders, mortgage advisers etc in the media. Client confusion has probably never been higher since the new regs'. Who can a consumer trust?

I thought the FSC was to promote the industry and the value, we do not hear much and all that's happened is clients are more confused.

I think the summit may be interesting but I am not sure the answers are there. I think clearly defining the problem before looking for a solution is the answer.

I also think having clear, clean data to start with would help. I also think the FSC may need to look at their purpose and mission.

Financial literacy, access to lending and financial advice, the cost of insurance, and the cost of living are all strong headline themes.

My observation is that the bird’s-eye view is often overlooked, and we do not acknowledge the role of government schemes and protections, including ACC, consumer rights laws, and other lending and conduct regulations.

At the same time, the government continues to be comfortable allowing market leaders to set the tone, with examples extending to supermarkets and electricity providers.

The real issue is not the quality or professionalism of advice. Rather it is the barrier that prevents lower-net-worth customers affording advice. and those costs are unregulated, causing the product providers to compete on the commission-based battle field, and in this arena, the cost of advice results in high cost of product.

If we are honest, it takes a high income to live well in New Zealand, and the cost of service are always borne by the end customer.

So who will be first to put this discussion on the table: is adviser commission really justifiable?

keeping it straight & simple seems to be the hardest thing to do.

making it complex & confusing looks like the trend.

If by 'review' you mean more regulation, it's not the answer. Adding layers of clunk to the process only deters client engagement.

Clients have zero interest in anything that's not about getting the job done. They don't care about what words you use to describe how we have their interests at heart, they expect it, they just want results and yesterday is good.

There seems an industry has evolved around placing hurdles in the way of good business and like AML it only adds complexity while those it's intended to capture step around it, but I guess they can say "there I've made some rules now pay me" while everyone else suffers working through the layers of dross.
Paperwork / regulation only adds cost, clients just want results and no amount of verbiage will improve pathways to that end.

We're all about best practise, good client outcomes and getting the job done that's fit for purpose, it's why we exist, and we earn a commission for it and so we should and yes, good record keeping is important not just for future client engagement but also to protect ourselves ... got it!

So if anyone from the industry is reading this, take note, after years of engagement with clients and advisers alike and conversations held across the board I can report no one is interested in more pointless regulation in fact if you could pare it back to a bare minimum would be great, the industry and clients will thank you for it.

Brian Coogan, "there I've made some rules now pay me" says it all, aka "job creation".
If advisers do something like this, that's call "churning".

way, WAAAAAY too late to be talking about unintended consequences.

Way too late.

Failed to articulate the problem regulation was meant to solve.
(Stress testing the policy settings shaping our profession? LOL)

Failed to listen to us in the "consultation" phase.
(It is still far too hard for Kiwis to access the advice we know they need)

Failed to differentiate Sales from Advice.
(The code is far too easy for VIOs and those weird "property investment" outfits to use and abuse in the continuation of their business as usual)

Come to think of it, what value can NZ get from APAC?
Countries all made their choices. Asian countries generally chose access to advice, allowing tied agents and VI. NZ and Australia chose crushing regulation in pursuit of professionalism. South Africa chose a mix. China chose control. The USA chose “freedom”, or something (bribery and corruption).

@MrT – I pity the fool that tables a discussion on adviser commission.

Putting the commission issue to one side, there is another inflationary pressure caused by distribution via a network of adviser intermediaries. Those who were around when Partners Life launched will recall that Partners didn’t just dangle the highest commissions and best trips, they also offered products with (usually) the best wordings.

FMA reports and guidance on replacement business over the years make it clear they like to see independent research on file when they encounter replacement business. Use of external/independent research can evidence that an adviser is giving priority to a client’s interests when replacing lower-rated cover (or choosing between providers to place new cover).

Over time insurers have responded to FMA expectations by removing “soft dollar” and then volume-based incentives. With upfront commissions fairly consistent across providers, insurers have been forced to compete for the new business dollar in the ratings houses. The ratings war replaced the commission war (some time ago).

But surely this is great for consumers? Take trauma cover - while an adviser can’t know in advance what a given client’s trauma claim might be for, surely better wordings = better outcome at claim time (all other things being equal)? The safest thing (for client and adviser) is to recommend the best cover, or at least better than what they already have (if replacing).
The ratings war has seen trauma benefits evolve to cover more conditions (with full and partial payments), feature definitions that expand the contract boundaries for some conditions, and allow continuous/immediate reinstatement options. But these improvements aren’t free: better wordings = more claims paid = inflationary pressure on premiums.

I don’t think insurers can put the policy-wording genie back in the bottle by bringing a full suite of “lower tier” affordable products to market. Having conditioned the intermediated distribution channel to sell based on wordings, insurers have collectively backed themselves into a corner. And a separate second-tier offering sold via internal distribution would likely create a new generation of “bank product” to be replaced by the intermediated channel.

One option is to try and unwind some of the damage, as Partners Life is doing. Close the flagship plan, unbundle those wordings, and offer on a new plan promising affordability through modularity. Allow existing flagship plan members to transfer and hope that by the time clients have jettisoned enough modules for the remaining cover to be “lower tier”, age and/or health prevent easy replacement. And hope advisers stay loyal.

This move won’t lower the barriers to entry, as the affordability measures are designed to retain existing PPP members, and retain JP members at some point in the future. Don’t get me wrong, I think the changes are a very good move, but something radically different is needed to solve the “access to advice” problem, when it comes to life and disability insurances at least.

Implementation, not advice, is the challenge. After all, the advice is “free”. In 2011 Massey delivered a report demonstrating an underinsurance problem. If the same study was run today, I expect it would show that the products and distribution methods that have dominated the last 15 years have had little (if any) measurable impact.

Picking up on Brian Coogan's comment on AML, I spent an hour I'll never get back on a Teams call with the DIA, which has taken on responsibility for AML from the FMA.

I mentioned to the speaker that research by Dr Ron Pol, an NZ AML expert, finds the AML bureaucracy has a 0.1% success rate in many countries. He recommends using the money spent on AML to support those that fight crime, instead of supporting an expensive process that clearly doesn't work.

When asked what the outcome of "The 2028 Financial Action Task Force (FATF) Mutual Evaluation" looks like, his response was all about the process and had nothing to do with the outcome. The goal being the prevention of illicit funds circulating throughout the community. I guess that is not part of his mandate.

And there lies the issue. Focusing on a failed process and not the problem.

Have a think about that success rate the next time you have to process a trust for AML. Here is a link to a paper written by Ron on this very subject:

https://www.tandfonline.com/doi/full/10.1080/25741292.2020.1725366#references-Section1

@ John Milner - well said.

FYI - let's hope these changes below make a difference.

New Zealanders will soon face fewer unnecessary barriers to proving who they are under a refreshed anti-money laundering Identity Verification Code of Practice announced today by Internal Affairs Minister Brooke van Velden and Associate Justice Minister Nicole McKee.

The majority of the Code will come into force on 1 July 2026, marking its first update since 2013.

“The AML regime has become too slow, too repetitive, and too frustrating for ordinary New Zealanders and the businesses serving them,” says Mrs McKee.

“For years, AML compliance has meant higher costs, slower transactions, and endless frustration. This Government’s changes deliver the most meaningful reduction in AML red tape since the regime was introduced.”

“This refreshed Code is an early example of our improvements to the AML regime – with clearer guidance, more consistency, and a more practical approach for businesses that have been crying out for reform.

“AML rules should target real financial crime, not low-risk customers. When the risk is low, requirements will be less burdensome.”

“The new Code makes it easier for businesses to check Kiwis are who they say they are in ways that are safe, sensible, and proportionate to risk,” says Ms van Velden.