An options paper was released at the weekend, looking at ways to address problems identified with the conduct of financial institutions.

It follows the Reserve Bank and Financial Markets Authority's investigation into the conduct of banks and insurers in New Zealand, and the Royal Commission of Inquiry, which uncovered misconduct in Australia.

Commerce Minister Kris Faafoi said it had become apparent that financial institutions "have not been sufficiently focused on benefitting those individuals who use their services and managing the risk of misconduct within their business...While the situation in New Zealand does not appear to be as bad as it is in Australia it is still clear that some things need to change."

The Government wants financial institutions to focus on ensuring good customer outcomes over the product lifecycle, to ensure access to financial products and services that promote good customer outcomes, alleviate the imbalance of power between customers and financial institutions, to better manage conflicts of interest and take responsibility for managing conduct risk.

As well as indicating the Government’s preferences for the removal of soft commissions, and redesign of adviser commission structures, it lays out a series of overarching duties that it thinks should apply across the financial services sector and asks whether a code of practice is required to provide greater certainty about what each would mean in practice.

These will be familiar to financial advisers.

They include a duty to consider and prioritise a customer's interest, a duty to act with due care, skill and diligence, a duty to pay due regard to the information needs of customers, a duty to manage conflicts of interest fairly and transparently, a duty to ensure complaints handling is fair, timely and transparent and a duty to ensure systems and controls are in place to support good conduct.

The options paper said the broad nature of problems identified in the sector and a lack of focus on customer outcomes suggested a need for broad, overarching duties to shape conduct.

"Having overarching duties alone is not sufficient to achieve good conduct, but it is an important step towards ensuring financial institutions are taking these obligations seriously and are accountable for how customers are treated overall. We suggest that these duties should apply to all activities of financial institutions."

The paper acknowledged that some of the proposals would create new compliance costs and additional administrative burden for financial institutions.

Submissions are open until the end of next month.