FMA on lookout for good behaviour

Consumers should notice an improvement in the way their banks, insurers and other financial services providers deal with them as a result of a new regulatory focus on conduct, the Financial Markets Authority says.

Many of New Zealand’s financial service providers are now operating under the Financial Markets Conduct Act, which introduces clear conduct obligations for the first time.

The FMA said it was a shift of emphasis because as well as checking that providers were playing by the rules, it would want to see that they had the best interests of their customers at heart.

FMA chief executive Rob Everett said the basic principle of putting clients first was simple and the whole industry should be held to it. ‘‘I have no patience for people who think it is inappropriate or difficult to implement,’’ he said.

The FMA has released a guide that says providers should be considering things such as how their performance is demonstrated to clients, how conflicts of interest are managed and disclosed, and how well they communicate with clients.

Providers are encouraged to think about questions such as how they can tell the performance of their products and services is consistent with good outcomes for customers.

‘‘How do you know that customers will have the same or better outcome with your services and products as they would have with similar services and products offered elsewhere? And how do you communicate all of that?’’

Everett said the FMA had seen varying degrees of understanding of what was expected of financial services providers – even bigger firms were sometimes still struggling with what would constitute good conduct, he said.

‘‘It’s not about whether someone will buy a product but whether you’ve properly disclosed the pros and cons,’’ he said.

‘‘I hope consumers see a major change in the way they are dealt with over time.

‘‘I don’t think it can be transformed overnight, it will take time, but we want to quietly and steadily raise standards.’’

As a result, consumer expectations should also increase, he said.

The FMA is seeking submissions from the industry and other stakeholders until the end of October.