Financial Markets Authority director Michael Hewes Photo: Supplied / FMA
The first review of the new financial advice regime has found some licensed advisers are taking a tick-box approach to compliance, with a small number of lapses resulting in harm to clients.
All financial advice providers must be fully licensed following the conclusion of a two-year transition process comply with the new code of conduct as well as minimum standards.
Financial Markets Authority director Michael Hewes said the regulator was generally encouraged by the progress made though identified a number of areas for improvement.
For example some advisers were not giving clients suitable advice, as required by the code, while others were not meeting disclosure standards about the financial products being offered, and there were a few cases where advisors were not in compliance with the regulations.
"In those instances where compliance was either poor or complacent, the FAPs ran the risk of delivering poor outcomes for their clients," he said.
"In some of the worst cases where we saw client harm, this has led to formal regulatory intervention, including public censures.
"Some FAPs also had a limited understanding of the purpose and intent of the regime and took a 'tick box' approach, rather than looking at how their arrangements can achieve good client outcomes."
He said all financial advice providers should read the report consider ways to make improvements to their operations.
Financial Advice New Zealand said the review indicated most were meeting the requirement of the new code of practice.
Chief executive Nick Hakes said ongoing professional development was a driver of quality financial advice and led to a better consumer experience.
"Research shows that when clients work with a trusted adviser, they enjoy a higher quality of life, more financial confidence, and experience less financial stress," he said, adding that advisers played a key role in helping consumers understand the strategy and products being offered.
Informed client consent was an essential component of the new code.
