The recent report from FMA on licensee reviews was encouraging and timely.
The reference to documentation and record keeping indicates that improvements are needed in these areas, but overall, the FAPs reviewed were given a pass mark from the regulator.
But there is an issue developing over which FAPs have little control but which drastically impacts their ability to meet regulatory requirements and their clients' expectations.
As Product Providers (Instos) develop their licence applications to comply with the Conduct of Financial Institutions legislation (CoFI), it may be that there is an area of heightened risk.
FAPs and Financial Advisers have been charged with providing 'good client outcomes' within their relevant legislative and regulatory frameworks - obligations that all right thinking advisers are happy to observe.
However, feedback reaching the Laird's desk suggests that the desired client outcomes are being inhibited by poor levels of service support from Instos to intermediaries across the board.
In other words, if the service from Instos provided to FAPs falls below the levels reasonably expected by community standards, customers' interests will be compromised.
This not an acceptable situation.
Having been in the corporate world for long enough, I understand and appreciate the constant battle to keep systems up to date and for the technology to deliver to the business.
But in this day and age, Instos should be investing sufficiently to enable efficient workflow, timely administration, and for information transfers to be done within hours - not days and/or weeks.
I know, I know - I can hear Management and Directors protesting about the competing pressures around capital management, solvency, project costs, and dividend pressures. But a reasonable standard of service support being provided to FAPs to meet client expectations is a hygiene factor in Maslow's terminology - it's a basic requirement, not a luxury item.
Leaving Financial Advisers short of the necessary support will inevitably lead to poor client outcomes and result in a seriously negative experience.
I suggest that as a first step, the Instos cease and desist from landing demands on FAPs to comply with their individual Fair Coduct Programmes and enter into Service Level Agreements to commit to providing support the Adviser needs and that the consumer has a right to expect.
The FMA has made reference to a 'joint responsibility' between product providers and advisers for good client outcomes - it's only fair that both parties participate in discharging that responsibility.
The Laird
July 2024
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