Finance sector’s ongoing fees fail
The financial services industry continues to do a poor job of explaining its fees to its customers.
Just 53 per cent of investors surveyed by the Financial Markets Authority (FMA) said their financial service provider had explained its fees clearly.
The providers included banks and KiwiSaver scheme managers.
The FMA’s 2017 Conduct Outcomes report also revealed many financial services companies were doing a poor job of helping clients understand why the financial product they had been sold, or recommended, was appropriate for their needs.
Just 52 per cent of the 889 people surveyed by the FMA agreed of strongly agreed with the statement: ‘‘They helped me understand why the product was appropriate for me.’’
FMA general counsel Nick Kynoch said 2017 was marked by progress from the financial services industry towards putting customers’ interests at the centre of their businesses.
It was a shift the FMA aimed to make happen through a mix of using hard power, such as taking prosecutions for insider trading, and soft power, such as telling the likes of banks, KiwiSaver providers and financial advisers how it would like them to behave.
The FMA had been working hard to communicate its expectations to businesses, Kynoch said.
‘‘Most wanted to ensure they understood our expectations, and were proactive in speaking to us about their issues or concerns. When mistakes did occur, market participants largely accepted them, and took steps to make sure they were not repeated.’’
The FMA did 72 audit visits to authorised financial advisers (AFAs), and found many of their disclosure statements, meant to tell clients how they operated and the fees they charged, ‘‘did not comply with the regulations’’, and many AFAs could not prove they had given them to their clients.
The FMA continues to be concerned about the high level of scams targeting New Zealand investors, including those associated with ‘‘initial coin offerings’’.
‘‘Scams are a widespread concern for other countries and regulators; and there is no one simple solution to the issue,’’ the FMA said.
‘‘We will continue to encourage investors to be sceptical about ‘get rich quick’ offers, and to deal with a New Zealand-based licensed provider wherever possible.’’
Many of the scams based overseas were beyond the reach of the FMA, and recruited Kiwi investors over the internet.
Under pressure from media coverage, the FMA also used 2017 to crack down on overseas financial services firms pretending to be regulated here by entering themselves on the Financial Services Provider Register.
‘‘Consumers and some overseas regulators can misinterpret registration to mean that a provider is actively regulated in New Zealand for all the services it provides, either here or overseas.
‘‘These businesses may disclose their registration in a way that gives this impression, particularly overseas, to leverage the good reputation of New Zealand’s financial markets inappropriately. It is also misleading to consumers,’’ the FMA said.