Simon Papa: Access to advice - Is adviser conservatism the issue?
OPINION: The FMA’s access to advice report attributes advice access issues to adviser conservatism but the absence of structured market or economic analysis means it may misdiagnose what is in fact a demand-side problem.
Saturday, June 27th 2026, 4:10PM 
2 Comments
by Simon Papa
In March 2026 the FMA published its report Access to financial advice in New Zealand – Challenges and opportunities for the financial advice sector, alongside its related consumer research findings.
The report seeks to support improved access to financial advice in New Zealand and is a valuable contribution to that end. However, the report is based on a limited methodology and analysis and therefore, in my view, will not be fully effective. The central issues are that it does not consider key aspects of the market for financial advice services, including sector business models (identified as one of the four key areas for review in the terms of reference for the report), and that it does not provide an economic analysis of the issues the report and consumer research findings identify.
The report highlights an important issue with the Conduct of Financial Institutions (CoFI) law that applies to banks and insurers and that requires them to comply with a “fair conduct principle”. That is, the CoFI law creates the potential for the FMA to influence the supply of financial products and services, not just conduct in relation to such supply, which has traditionally been the FMA’s role. The report indicates that, under CoFI law, banks have obligations to supply financial advice services in some circumstances but provides no real clarity on how the FMA considers that applies in practice.
WHAT FMA FOUND
For financial advice providers (FAPs) and fintech firms, a key theme in the report is that they are taking an overly conservative approach to regulatory risk, which may reduce the availability of advice services. For FAPs, the FMA considers that creates a tendency to default to broader-scoped advice services to ensure compliance. For fintech firms, FMA considers they are unduly limiting the potential of their services to ensure there is no regulatory capture.
With respect to banks there is an additional concern, which is that they are not fully deploying their capability to provide financial advice to consumers, particularly on “everyday products”.
The report also addresses access issues in relation to ongoing reviews, Māori and decumulation.
WHAT IS THE PURPOSE OF THE REPORT?
FMA describes the report, and the companion consumer research findings, as part of an “ongoing conversation” about access to advice. However, as I explain below, the limited scope of FMA’s review and economic analysis means that the report is not well suited to fully achieving that purpose. For example, the report seeks to identify supply-side issues without substantively addressing the key demand-side factors that affect whether consumers obtain financial advice.
The primary barriers preventing consumers from accessing advice identified in the consumer research were not supply constraints, but affordability, not knowing where to start, and a preference for self-management.
SUPPLY SIDE STREET
To be fair to the FMA, it is required to consider supply-side factors under the Financial Markets Conduct Act. The Act states, as one purpose of the financial advice regulatory regime, that the FMA should regulate “with a view to ensuring the availability of financial advice for persons seeking that advice”.
Read alongside the CoFI law (developed at the same time as the financial advice regulatory regime), that purpose reflects a view that the market is an inadequate mechanism for allocating financial products and services. In particular, it assumes that consumers cannot effectively operate as market participants. Based on that, the conclusion is that the State has to step in to regulate not just conduct but also supply itself. This approach was described by one senior official who was involved in the development of the law as follows:
“New Zealand’s journey represents a wider shift happening all over the world, where countries are moving away from regulation on the assumption of the “rational decision maker” - i.e., the idea that the customer will always choose what is right for them, so long as they are given the right information.… banks and insurers will instead need to prove that they have met a regulator-determined bar, and are actively engaged in ensuring that customers are treated fairly.”
NO ECONOMIC ANALYSIS
That policy and legislative background may explain why the report does not provide a cogent analysis as to why a significant proportion of New Zealanders do not seek financial advice. Given this apparent market failure, an obvious response would be to undertake a structured analysis, grounded in economic principles, to identify the nature of that failure, its causes, and potential solutions.
However, the report does not refer to economic theory, and does not examine pricing, affordability, market structure, or the economics of advice provision. While it refers to concepts such as commercial viability, it does not explore them. This is despite the consumer research identifying affordability as the primary barrier to access, and providing some evidence of what consumers are prepared to pay for advice.
Those findings are not integrated into the report in any meaningful way. Instead, they are presented as something that “should be read alongside” the report.
The absence of economic analysis might be explained by the scepticism, reflected in the policy underlying the law, about markets as an effective mechanism to allocate financial products and services. However, that does not preclude economic analysis. And undertaking quality economic analysis is the exact goal FMA has set itself, since it appointed its first chief economist 3½ years ago. FMA describes the chief economist role as being “to deliver robust economic research and analysis that informs regulatory priorities, embedding the use of economic theory and analysis in our decision making and helping us to better understand economic drivers and market dynamics across the financial sectors that we regulate”.
Instead of substantive economic analysis, the report reflects a compliance-focused perspective. So the report identifies “over-compliance” as a key issue. Even in a compliance context the report falls short including by conflating the scope of advice services with the six-step advice process.
The absence of any analysis of sector business models and structures, including remuneration arrangements, further weakens the report. One question that could have been considered is whether features of the regulatory regime, such as the requirement that FAPs must (as a default) directly engage advisers, may affect sector dynamism and, in turn, the types of advice provided and their affordability.
YOU’VE ALL DONE VERY WELL
The report notes that advisers have requested guidance on where the FMA considers there is flexibility in compliance, to support improved access to advice. The FMA responds that it “will engage further with the sector to find and share practical examples of what good looks like, including case studies”.
Given that FMA states it undertook detailed fieldwork, including conducting literature reviews and completing 80 interviews, it might reasonably be expected that FMA is already in a position to provide relevant use cases.
Since the current regulatory regime came into force in 2021, advisers have consistently requested written guidance from the FMA that reflects the FMA’s deep expertise and knowledge as well as the standards it applies in determining whether compliance systems and financial advice meet regulatory standards. In practice, very little substantive guidance has been provided including almost no guidance on the significant restrictions on incentives that came into force in 2025.
Instead, FMA tends to provide high level commentary and mostly accentuates the positive.
At the same time, in the report FMA expresses concern that the sector has not embraced the flexibility of the principles-based regime, noting that “some FAPs have implemented overly complex compliance arrangements”. However, that outcome can be at least partly explained by the lack of guidance on how the regime is intended to operate.
The absence of guidance is exacerbated by the fact that the FMA has not referred a financial adviser to the Financial Advisers Disciplinary Committee since 2020. So that closes off a valuable channel for feedback on the ways advisers can fall short and, in effect, on what they need to do to meet regulatory and professional standards.
In contrast, in the case of lawyers (as one example), disciplinary decisions are published regularly about a wide range of conduct, with outcomes ranging from warnings to striking off. That highlights that disciplinary processes for professionals provide an incentive to comply, accountability and education. The existence of the financial adviser disciplinary process reflects that advisers were intended to be regulated as a profession, alongside regulation of FAPs as financial institutions.
AN OBLIGATION ON BANKS TO PROVIDE FINANCIAL ADVICE SERVICES?
With respect to banks, the report states that “ensuring that financial advice is accessible and likely to improve outcomes is consistent with the [CoFI] fair conduct principle”. This strongly suggests that regulatory expectations extend beyond how financial advice services are provided and that FMA is seeking to influence the extent to which they are provided, where banks are licensed FAPs.
When the CoFI law was reviewed in 2025, Cygnus Law submitted that it should be amended to remove any ability for the FMA to influence the supply of financial products and services.
That position reflects the absence of evidence that regulators are any better than markets at allocating resources within markets. That submission was not accepted. So it was probably inevitable that the FMA would seek to apply CoFI to influence the supply of financial products and services, especially given that it has identified “improved access to products and services” as one of the seven outcomes it is seeking as part of its outcomes-focused approach.
Orthodox market principles, even with their limitations, provide a coherent framework for understanding how markets operate and when intervention is justified. By contrast, the shift toward open-ended “fairness” standards, as epitomised in the CoFI law, replaces that without offering any similarly rigorous alternative. What is “fair” is inherently vague and contestable.
FMA could have attempted to place some rigour into the access to advice review by applying a full market analysis grounded in economic theory. Instead, with respect to banks, it introduces further vague terms such as “accessibility” and “improved outcomes”, which compound the problem.
It is possible that banks’ apparent reluctance to provide financial advice more extensively reflects rational conservatism.
Over the last few years FMA and the Reserve Bank have, quite appropriately, brought proceedings against many of New Zealand’s largest financial institutions, including banks, for systemic failures to comply with quite basic compliance and contractual obligations. One result (with respect to insurers) is the end of multi-policy discounts because of their inability to give effect to them operationally.
So pressuring banks to provide financial advice services may not produce the improved outcomes the FMA seeks.
Simon Papa is a Director at Cygnus Law Ltd.
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Comments from our readers
Here’s what it boils down to:
Demand for advice is weaker and more price-sensitive than regulators assume — but the FMA is focusing on supply-side behaviour as the main constraint.
Boy are the FMA barking up the wrong tree. How can they do the research, publish the stats, and then come to the conclusions they do – that it’s a supply-side issue?
28% of respondents have used an adviser in the last 12 months – this means that 72% did not.
23% of respondents indicated they had not spoken to anyone or looked for advice
This is a good answer, to a bad question. Because those who did look for advice were not talking to advisers. Most probably spoke to their friends, or their bank.
26% of respondents didn’t know where to start
In the research findings the only mention of ‘Financial Literacy’ was anecdotes from FAPs that poor FL affects low uptake of products, participation and understanding.
In the ‘Challenges and Opportunities’ report Financial Literacy appears precisely zero times.
In the same survey the most common thing people said Advisers do is budgeting advice. Seriously. When asked what consumers thought Financial Advisers can help with, 55% said budgeting. It was the top answer. The top three were budgeting, KiwiSaver and Retirement planning. The bottom three (other than “don’t know”) were F&G insurance, health insurance, and crypto!
Far more people said a Financial Adviser can help with Tax Advice, than with Life Insurance. If they think we do budgeting and tax advice then is it any wonder 72% didn’t think they needed to talk to us?
In questions about who did take advice, the unsurprising result was the vast majority of people were earning over $80k, and the proportion not receiving advice goes down as income goes up.
Adviser know this. And we also know how much it costs to deliver our advice. We know that with regulation these costs increased.
Advisers know there are risks to giving advice, including liability, compliance audits and penalties. We know that with regulation these risks increased.
This is the tree thing. Access to advice has actually improved. More people are joining the profession. Adviser numbers have increased, and Faps are plentiful, as are NRs. But in the face of growing risk and increased costs the effort of advisers has been focussed on supplying to those who are buying.
In the ‘Challenges and opportunities’ report, p8
“Many FAPs saw the value in tailoring the nature and scope of advice to a client’s circumstances; however, perceptions of regulatory risk led to a default towards broader scoped advice, even where a more appropriate scope might be sufficient. As a result, some financial advisers were uncomfortable designing new advice journeys, due to uncertainty about how to meet their conduct obligations in practice.”
They talk about how there is “flexibility” in the regs to “scope” the advice journey to suit, then give examples of very tightly scoped advice where a mortgage broker advises on KiwiSaver and a bank rep advises on term deposits.
What the FMA writers are actually saying is FAPs are focussing on higher value clients with more complex needs. FAPs are either too scared or too cautious (about regulatory risk) to design simpler, focussed or targeted advice processes or solutions that are more suitable to lower value clients. They can talk all day about “efficient” and “scalable” advice but this is what they are actually saying.
This is my conclusion to all this; And it’s not new. And it’s well understood by those of us actually out there giving the advice.
It’s hard to ‘improve access to advice’ when the real barrier isn’t supply — Tightening regulation didn’t reduce access to advice — it just quietly pushed it upmarket.
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You write that “the CoFI law creates the potential for the FMA to influence the supply of financial products and services, not just conduct in relation to such supply”, to which I would offer two replies: Yes; and About Time.
Your piece (and also your submission on the draft Fair Outcomes Guide) do suggest a preference for Rational Choice Theory and the Efficient Market Hypothesis. The problems with this being: Humans are not ideally-rational agents, and even if they were, the market is problematically inefficient.
The latter is by design, by and for the benefit of the financial institutions. Informational asymmetries mean that consumers often don’t/can’t obtain the information they need to make an informed choice about whether to acquire, retain, or dispose of a financial advice product. (Good luck finding out the actual/modelled loss ratio on optional benefit x on product y.) Extending conduct requirements/expectations beyond supply, into areas such as design and pricing over the full life cycle of products and service offered, should help rebalance the scales.
I agree with you when you write: “What is “fair” is inherently vague and contestable.” It doesn’t follow that it is unsuitable. Financial services law is full of such terms: “reasonable,” “care,” “diligence,” and “skill” immediately spring to mind. “Unusually large transaction” and “unusual pattern of transactions” from 22(1)(c) of the AML/CFT Act are vague, and currently subject to contest in FMA v InvestNow.
Finally, I agree that more FADC cases would be helpful. Also helpful would be more details from enforcement cases the FMA has taken over the years. For example: Where a FAP was found to have breached the Record Keeping standard condition, provide a couple of (suitably redacted) examples of deficient files, along with explanatory commentary. If your files look like that, then do better.