Romil Ghelani, head of financial advice at the FMA, said that there have been enough concerning reports to signal this as a priority over the next 12 months, particularly in mortgage and insurance advice.
Some of the issues coming through include allegations of fraudulent loan and insurance applications, and products being sold “in a pressurised way to clients in vulnerable circumstances” that don’t meet their needs. Ghelani said there have also been reports of “misleading and deceptive practices in general”, where it’s clear that the adviser prioritised selling the product over the client’s best interests.
This is the kind of conduct that the new financial advice regime aimed to stamp out. Ghelani said that while there hasn’t been a “massive” uptick in cases, there has been enough to warrant attention.
“We’re seeing enough of these cases coming through and progressing to our response and enforcement function that we want to signal this as a priority for the next 12 months,” Ghelani told advisers in a recent FMA webinar.
“We would guess that you’d want us as your regulator to focus on this type of conduct, and to make sure that we respond swiftly to keep your industry clean and trusted by consumers.”
Ghelani said the FMA will also be looking at how well consumers and investors understand fees, incentives and commissions.
“My view is that financial advisers are ahead of the game here, because you all have to disclose this stuff anyway,” Ghelani noted.
“We’re very interested in how that disclosure is working in practice, and particularly how it is introduced into the conversation throughout the advice process to ensure that clients understand what’s within those disclosures and make an informed decision.”
Complaints processes under the spotlight
With insurance disputes on the rise, complaints processes are one of the FMA’s cross-sector priorities over the coming year. Ghelani says the most common complaints in insurance are around pricing - specifically, the premium increases that have been seen over the last few years.
This is consistent with IFSO’s latest complaints data, which showed life and health insurance making up 29% of total complaints.
Service issues are the second most common complaint, and administrative issues are the third.
However, Ghelani clarified that complaints made exclusively about premium increases do not need to go through an adviser’s internal process.
“Having said that, we do encourage financial advice providers to report that somewhere,” he said.
“One, it’s a treasure trove of insights about consumer perspectives and sentiment, and two, it’s useful for the product providers themselves.”
“Then, if the consumer says they didn’t know about price increases when you gave your initial advice - that is an indicator that the complaint could be in relation to your financial advice service,” he added.
“That has to be reported and followed up through your internal complaints process.”
