FMA finds issues with advisers' record keeping

Sue Brown, Financial Markets Authority head of primary regulatory operations. Photo / Supplied

One year on from the introduction of a new licensing regime New Zealand's top level financial advisers are still struggling to document how they make investment decisions and recommendations to the public, according to the investment watchdog.

All financial advisers had to become registered with the Financial Markets Authority as of July 1 last year, but those who wanted to give personalised advice on complex investment products also had to meet minimum qualification requirements and comply with new professional standards to become authorised financial advisers.

The FMA is about to release its first interim report following two rounds of monitoring checks on 34 of the nearly 2000 authorised financial advisers (AFAs).

Sue Brown, head of primary regulatory operations at the FMA, said her team had found a high level of willingness to comply with the regulations.

But some areas of concern had emerged.

"Some of the issues where we have taken steps are record-keeping - showing the trail that enables us to have confidence that they are following the right process, and suitability."

Brown said the problem was with the quality of record-keeping.

The FMA's monitoring has so far focused on the lower North Island, Tauranga, Queenstown and Invercargill but the problems did not appear to be linked to any region.

Brown said she was also concerned that some AFAs had not been proactive in ensuring they met ongoing licensing conditions by confirming in writing every year that their adviser business statement is still compliant.

Brown said the FMA had had to write to advisers to remind them of the condition and then take further steps to initiate contact after some did not respond.

"We would hope that authorised financial advisers would read the standard conditions of their license."

Brown said AFAs were mainly compliant and the FMA was receiving more complaints about registered financial advisers and unregistered people giving advice.

Registered advisers can give advice on simpler products such as insurance, bank term deposits, and mortgages. The FMA relies on public and industry complaints to check up on registered financial advisers.

The FMA has received complaints about registered advisers giving advice on pension transfers from the UK and advice on investment-linked life insurance - areas which can only be looked after by an AFA.

Brown said consumers seeking advice needed to be vigilant.