Draft Financial Advice Code - Code Standard Five
Draft Financial Advice Code - Code Standard Six and Seven

It’s not just banks; insurers and advice businesses need to read the latest FMA report on banking conduct

No media report I have yet seen appears to have identified that the issues and FMA requirements outlined in the report will be relevant to all financial services providers, not just the banks. That includes companies contemplating Financial Advice Provider licences, and those intending to distribute insurance on a no-advice basis too.

If you are in financial services, read the banking report, and measure your financial services business against the findings and clear requirements that the FMA and RBNZ are headlining. You might also assume that these requirements will form part of the licensing requirements for financial advice providers.

Take particular note of the following:

  • Sales incentives – clear message that either these have to be removed or bank managers are going to be required to explain how they will strengthen their control systems to sufficiently address the risks of poor conduct that arise with such incentives.
  • Contemplate the implications for other sales incentives and commission payments throughout the wider financial services industry. Note also a further report focused solely on bank sales incentives is going to be released on 15 November. I am expecting it will be similarly tough
  • Compliance assurance – if you have not already done so, measure your business against the FMA 2017 Conduct Guide
  • Need to be measuring and reporting on “lead” as well as “lag” indicators to identify and mitigate emerging risks early, rather than simply identifying things that have already gone wrong.

Quotes – emphasis added by me:

  • “Banks cannot rely on the absence of identified issues as an indicator of good conduct.”
  • “Boards must be proactive in considering what information they require to obtain assurance of good customer outcomes.”
  • “The lack of conduct requirements in the delivery of banking products (particularly those distributed without financial advice) has hampered the FMA’s regulatory oversight and the development of consistently strong governance and management of conduct risk across the industry.”
  • “More work is required to ensure banks are comfortable with the quality of conversations and advice that occur via intermediary channels, and that the incentives offered to intermediaries are aligned with good customer outcomes.”


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