FMA fights hard to avoid unconscious bias: Hewes

The Financial Markets Authority (FMA) has revealed that it makes a point of using people from varying backgrounds when it undertakes monitoring inspections of advisers' offices.

It also makes sure that several people go along when the FMA is visiting advisers' premises to inspect their records.

The reason is to guard against unconscious bias among its staff, which might otherwise distort the dependability of its investigations.

This was revealed by a senior FMA executive in a webinar to advisers on Wednesday.

However, in response to questioning, the comments were rowed back on later.

The remarks about bias came in a webinar on business ethics that was organised by Financial Advice New Zealand.

The webinar heard that many people have hidden, or unconscious biases that they are sometimes unaware of.

This problem was important enough to be addressed by the head of financial advice at the FMA, Michael Hewes.

He described an issue seven to eight years ago among FMA inspectors that visited advisers' offices to check business records on site.

“Teams would arrive at advisers' premises and look around and say, nice office, great CRM system, everything therefore must be in order,” Hewes said.

“But arriving at the home office, the adviser might not be so well dressed, and your natural bias says, Hmm, is there something to go through and find here?”

Hewes said since then, there had been a lot of training to overcome bias, in order to avert the danger of a monitoring visit having the wrong outcome.

One method of improving operations was to make use of a new, diverse, makeup of inspection teams.

“We have a wide range of people with various backgrounds, ethnicities, skills etc. Generally, we will always send about four people to a monitoring on-site visit.”

The reason for this was to prevent subconscious bias from having a negative impact on the solidity of the inspection system.

These comments by Hewes triggered a lot of questions from the on-line audience, and he made a point of softening his line later in the webinar.

“There is absolutely no bias in the FMA,” Hewes insisted.

“It was simply an example (of the problems of bias), we absolutely love office visits because generally there are some hot scones waiting for us.

“So no bias at all, no views either way.”

Inspection visits to advisers' offices are sometimes done in response to complaints or to the FMA's own intel about deficiencies at a particular business.

But they are sometimes done just to make sure that advisers know they might be visited at some point and are thereby incentivised to keep good records,

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