Clare Bolingford, the FMA’s Director of Banking and Insurance, says guidance will be published to clarify the FMA’s expectations of providers and intermediaries but it first wants to collaborate with the sector to ensure COFI’s objectives were met and that there are “no unintended consequences”.

Bolingford was taking part in a panel discussion organised by the Financial Services Council.

“We have a real opportunity here to deliver regulation that’s proportionate to the industry and supports you in delivering the overarching principle of treating customers fairly,” she said.

But for the legislation to work effectively, a change of mindset will be needed. The COFI regime is intended to cover the whole relationship with the customer rather than just focusing on the point of sale, Bolingford says.

“It means paying due regard to the customer’s interests – putting the customer at the forefront. Firms will need to have a whole-of -company strategy about how they think about the customer.

“It means moving away from a legalistic approach to compliance with rules to a focus on good conduct risk management to deliver fair treatment. It means checking how products are performing for customers rather than assuming they work because it fits with the commercial strategy. It means communicating clearly and regularly with customers and acting quickly of something goes wrong.”
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Bolingford said intermediaries were “vitally important” for giving customers access to financial products and services.

“Intermediated distribution channels exist to service diverse market needs and customers can get improved outcomes through great quality advice.” But she said the market dynamic between providers and intermediaries did not always facilitate fair treatment of customers and to achieve the right outcomes, responsibility had to be shared between the provider and an intermediary – as has been set out in the latest Cabinet guidance on the COFI bill.

“’Shared’ means both having the customer at the heart of their respective businesses,” Bolingford said. It did not mean compromising the commercially and legally independent relationship between providers and their intermediatires.

The FMA also wants to avoid unintended and unnecessary consequences in implementing the new legislation. Bolingford said she had heard in the banking sector that financial advisers were being asked to undertake audits at the adviser’s cost. There was no standardisation around these audits and some advisers had been required to do several.

The FMA, she said, did not want to add cost and burden to the industry without any obvious benefit to the customer.