The FMA recent published the draft terms of reference for a review relating to access to financial advice.

This is important because the Financial Markets Conduct Act 2013 , as amended by the Financial Services Legislation Amendment Act 2019 , doesn’t just have the purpose of regulating advice. It includes a purpose to “[ensure] the availability of financial advice for persons seeking that advice”.

The FMA’s four page document is here. You can make submissions here.

There were two questions that people are asked. With each there was a limit of 4000 characters (650-800 words), which have necessitated brevity over comprehensiveness. Below are my responses to the two questions.

Are the four areas we are proposing to focus on appropriate as a basis for us to explore the challenges and opportunities for accessibility of financial advice? Are there other relevant key themes or focus areas that should be included? *

  • This review should focus less on consumer demographics and preferences, and focus on the other areas suggested in the terms of reference. In other words, focus more on the “supply side” relating to advice than than the “demand side”. This review represents a unique opportunity to investigate many aspects relating to the availability of advice, and I believe these supply-side areas should be prioritised. The FMA is also in a unique position to investigate the supply side more than others.
  • Digital advice, and the implementation of technology more generally, should be considered as distinct from “innovation” in a broader sense. It’s important the the review doesn’t just equate innovation with technology but also considers innovation in terms of new ways of doing things, including new business models and different types of service offerings. I believe separating these two topics would assist with this focus.
  • Regarding remuneration structures and advice business models, I believe it would be valuable for the FMA to investigate structures and models in New Zealand that are common – as well as structures and models that are less common, and have been tried. It would be valuable to compare and contrast the reasons for why some approaches are more common than others, including acknowledging commercial realities. It would also be valuable for the FMA to investigate structures and models that are common and have been tried in other countries and consider whether there are reasons for differences compared to New Zealand.
  • Additional areas I believe the review should cover:
    • Reviewing whether there are other countries that are considered to have better access to financial advice, and identifying factors that contribute to this, and how they might differ from New Zealand. (This might involve parsing whether this sense of having better access is real or perceived.)
    • The impact that third-parties have on financial advisers and how this in turn could impact the availability of advice. These include professional indemnity insurance providers, who might be reluctant to provide cover for more innovative approaches to servicing clients, which might subsequently result in less innovation occurring. Another set of third parties worth investigating are compliance service providers who provide guidance to advisers on how to meet their regulatory obligations (who, for many reasons, could be recommending more conservative approaches to compliance that limit innovation and wider-spread availability to advice).
    • The FMA should also take a clear-eyed look at its own contribution to making advice less accessible than it could be, based on its own published guidance, enforcement decisions, and communication with the industry and the public. I do not believe this will be a full review without some acknowledgement of how the regulator influences how the industry behaves. As an example, I believe that the FMA’s 2021 guide to talking about money online was particularly weak in a variety of ways, confusing rather than clarifying how people can discuss financial matters online.

Which industry participants, experts or other stakeholders should we engage with as part of this review? Is there existing research, literature and data (e.g. existing studies, market data on net worth and assets held, consumer demographic data, pricing and revenue flows) that you believe would be useful for us to use as part of this review?

Fundamentally, I believe that the FMA should engage beyond industry, so that it can ensure that New Zealand consumers – who I consider to be the most important stakeholders – are represented in this review.

I would advocate for something of a “citizen jury” – bringing together an assortment of switched-on people who have not deeply considered the financial service industry and these types of topics before, and having this jury consider these matters, including the relevant submissions and research that is being conducted for the purpose of this review, and provide substantive feedback to this review.