FMA Report on Replacement Business
Financial Advice New Zealand welcomes the long-awaited report on replacement business.
Many of the findings in the report highlight the relevance of proposed regulatory changes, which will help to clarify expectations of all advisers particularly around client interest.
The fact that, of 200 advisers originally identified, over 3% were issued with warnings and 12% of them were subject to further inquiry, while not unexpected, is disappointing. Unfortunately, it is this type of practice by the minority which tarnishes the reputation of the industry for the majority of advisers who are focussed on their clients’ best interest.
Key takeouts from the report that warrant further exploration include:
*The role of all industry participants (advisers, providers and groups) in identifying and managing conflicts of interest. development of standards and processes for managing such conflicts.
*The lack of understanding by many of the advisers identified in the report as to their legislative obligations.
*We will look to work with regulators, product providers and groups over the next few months to explore options to address these and other issues raised in the report.
We also welcome the FMAs decision to extend their inquiries to a broader review of replacement business practices including a review of QFE sales practices.