As we settle into the new financial advice regime, two key dates that advisers should keep in mind are July 1, 2023, when information recording for the first regulatory returns begins, and September 30, 2024, when the regulatory returns are due for the period between July 1 and June 30.
In the spirit of gaining valuable insights, on April 26 we delivered a 90-minute webinar with the FMA, featuring FMA’s Romil Ghelani, Dhasha Ratnayaka, and Lewis Pearce: if you haven’t had the chance to watch the recording yet, I strongly encourage you to do so webinar in the membership area of financialadvice.nz. In the meantime, I’d like to share some key takeaways.
Regulatory returns are a FAP Licence Standard Condition (Standard Condition 3). Most questions include factual information about the business and details that might have changed since the licence was granted. Other questions may seem a bit more nuanced and indirect.
As Romil explained, this is a reflection of compliance shifting from a tick-box exercise to a principle-based regime. Rather than relating directly to a compliance obligation, these questions are designed to capture the context on the size, nature and complexity of the FAP services. I think this is an important clarification, as some may not immediately understand why certain questions are asked.
Overall, the purpose of regulatory returns is for the FMA to gain an up-to-date understanding of the sector and support their ongoing monitoring of the advice industry, identifying priorities and focus areas. Thanks to the consultation submissions, the regulator has been able to adjust the questionnaire to meet the needs of all parties. And as we move forward, it’s crucial to remember that we’re in this journey together, with a shared goal of doing good for the clients and New Zealand at large.
During the webinar, the FMA emphasised three key expectations when it comes to regulatory returns, which I believe are worth highlighting:
In a nutshell, the FMA recognises the extent of the changes, and while in time they will raise their expectations, they’re committed to allowing FAPs and advisers enough time to embed the new requirements in their businesses.
During our session, the FMA talked us through each question and what is required, providing practical examples and taking the time to answer questions from attendees. That’s why I welcome everyone who hasn’t watched the webinar yet to find the recording at financialadvice.nz.
For example, they offered insights about Part 3 of the regulatory return questionnaire (Complaints). A complaint is an ‘expression of dissatisfaction’ directly relating to the financial advice provided, or the complaints process itself. So, unless a complaint is directly related to either of these, the FMA has no expectation for it to be captured.
The other important point to stress is that a complaint doesn’t have to be in writing: it could be in person, via phone, and so on. The key thing is for FAPs to document any complaints received and any actions taken. The FMA will not look purely at the number of complaints received, but what FAPs are doing to address them.
As for outsourcing, the same principle applies: if the outsourced service (e.g., catering services) doesn’t relate directly to FAP obligations and the financial advice services, it doesn’t need to be recorded. On the other hand, if it does relate to the service provided (e.g., third-party CRM system), then it will need to be recorded.
From familiarising yourself with the requirements, through to establishing processes for collecting and maintaining the necessary information, and developing a timeline for completing the regulatory return – it’s better to be proactive in this journey. And Financial Advice NZ is here to assist you with resources webinars, and support.
If you’d like to know more about our initiatives, visit financialadvice.nz and don’t hesitate to get in touch.