The regulator has made monitoring visits to around 60 class one and two FAPs from March 2021 to April this year. Some of these visits have been triggered by complaints, some random and others based on themes such as the response to Cyclone Gabrielle.
It plans to kick off monitoring visits of large class three FAPs next quarter.
Overall, the regulator was pleased with what it found.
"We were genuinely encouraged by what we are seeing," FMA director deposit taking, insurance and advice, Michael Hewes told Good Returns.
He was encouraged by the progress made and the transition to the new financial advice requirements which fully came into effect just over a year ago.
He acknowledged there had been a lot of change and advisers have lifted their game. “For a lot of advisers it’s been brand new”
“There’s been certainly been a lot of uplift required.”
What should hearten advisers is Hewes’ comment; “There have been no significant findings.”
An assumption could be made that investment advisers, who had already been subject to higher standards as Authorised Financial Advisers under the old regime, would have come out well ahead of advisers who had previously been Registered Financial Advisers.
That is not so Hewes said.
"What surprised us was the maturity and development of all sections of advisers demonstrated."
While the FMA was generally pleased with what it found it did have some warnings.
"We have also identified gaps that, if they remain unchecked, could escalate into poor outcomes for clients. In some instances, the root cause of these gaps was complacency, where the FAPs have taken a 'tick box' approach to compliance instead of making an effort to fully understand the purpose of the new obligations."
Its report covers various topics such nature and scope of advice, professional development etc.
Not surprising, as the regulator regularly raises the topic, record keeping was the area of most concern.
"More work is required in this area, most of our reviews had at least one gap in record keeping practices."
Common gaps included insufficient records or documentation of client interactions and communication, disclosure being provided to clients, grounds for the advice or research conducted, conversations discussing the risks and limitations of advice, and steps taken to ensure clients understood the advice.
"Record keeping overarches and underpins quality advice," Hewes said.
Hewes also noted there were new areas which were emerging that advisers need to be cognisant of and prepare for. These include cyber security, business continuity planning and technology systems,
