Financial Markets Authority cancels licence of Filcare Services Limited

Filcare Services Limited (Filcare) has had its licence cancelled by the Financial Markets Authority. Photo / 123RF

A financial services provider that largely gave advice to migrant workers has had its licence cancelled by the Financial Markets Authority (FMA).

Filcare Services Limited (Filcare) held a full financial advice provider licence and had approximately 1800 retail clients, many of whom were migrant workers from the Filipino community.

An FMA inquiry found that Filcare’s advisers had contravened its licence obligations by failing to:

• keep adequate records in relation to advice given to its clients;
• ensure its clients understood the financial advice they received;
• exercise care, diligence and skill when providing financial advice to its clients;
• provide adequate disclosures relating to advice; and
• demonstrate that recommendations made to clients were suitable.

“Filcare’s cancellation follows the termination of its distribution agreement with Fidelity Life Assurance Company Limited and AIA New Zealand Limited, and our subsequent inquiry into its affairs,” said Helena Lewis, the FMA’s head of perimeter and response.

“In particular, we observed that clients did not receive adequate nature and scope disclosures and were therefore unable to make an informed decision about whether to seek, obtain, or act on the advice.

“We also found that Filcare advisers failed to demonstrate that the recommendations made to clients were suitable. As an example, for a vast majority of clients, the documentation on file lacked the requisite detail to clearly show how the selected levels of cover were determined, and that the recommendation matched the risk tolerance, financial situation, and needs and goals of the client.”

In cases of replacement advice, the FMA observed minimal evidence that the advisers had considered and reviewed:

• the existing product to see if it continued to meet the clients’ relevant circumstances;
• the new product recommended to the client;
• the potential benefits that may be lost; and
• any other significant consequences of the switch for the client.

“Filcare advisers failed to take reasonable steps to ensure clients understood the implications of the financial advice,” Lewis said.

“In files concerning replacement advice, there was no evidence that clients were informed of the potential risks of replacing existing policies, such as losing benefits they might have otherwise received under original policies, or the likelihood of exclusions or limitations associated with changes in health, lifestyle, or occupation that have occurred since the original policy has been taken out.

“Clients were also not given sufficient time to understand the advice before deciding whether to follow through with it.”