Pace of change stretching industry limits

Katrina Shanks

Submissions closed in early June for an options paper released as part of the Ministry of Business, Innovation and Employment's review of the conduct of financial institutions.

The paper tackled some of the issues raised by the Reserve Bank and Financial Markets Authority's review of life insurers and banks, but proposed changes that would have wider implications.

The options paper said there was an imbalance of power between institutions and customers, some products were not designed with good customer outcomes in mind, sales were prioritised over customer welfare, there was not enough accountability to ensure good conduct, and there were generally weak systems to manage conduct risk.

Among its proposals for change were a range of duties for providers that appear similar to the financial advisers' code of conduct, including a duty to prioritise' customers' interests. It also proposed a duty to design remuneration and adviser incentives in a way that promoted good customer outcomes, and asked for feedback on a potential cap on upfront or trail commissions for advisers.