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Financial Markets Authority CEO Rob Everett addressed the Financial Services Council’s 2020 Generations Conference earlier this month about the year that’s been and the year ahead, including the FMA’s expectations of industry around customer care. The following article is a summary of this talk, which you can see on video here:
A year ago I stood on an FSC platform and ‘had a good whinge’ at those parts of the financial services industry that I felt were denying the need for change and still clinging to business models that had already ‘caught fire’ in the UK and Australia.
Then, earlier this year I spoke to the FSC about the new conduct laws coming for the New Zealand financial sector and my hopes for a more constructive and collaborative year. Well that was in February – which seems a world away now — and we’ve all had to deal with some very unexpected events. We’re all trying hard to return to normal but I fear that may be some way off.
On top of COVID-19 we’re all dealing with enormous change in the sector, with changes to Financial Adviser licensing and those that will spring from the Conduct of Financial Institutions (CoFI) legislation. In addition we are very aware of legislative change on a number of other fronts that are relevant for many financial services firms.
I’ve been really heartened and impressed by the nature of the financial sector’s response to COVID-19. It’s a real tribute to those who have been going through stress, but still managed to put their customers first. This period has shown that many parts of the industry — advisers, insurers, banking and funds management have really shifted gear when needed.
What has changed though, is that we’re seeing the end of healthy returns and stability, with a major market correction earlier in the year. For now market levels are back at all-time highs with the global economy being ‘pumped up’ by central bank stimulus and low interest rates. We all worry however at the prospect of more volatility in markets and more economic pressure ahead.
For financial services providers, it’s all been about customer care over this period, about understanding the pain points for these customers and setting themselves up to respond to them.. I hope to see a continued and relentless focus on operating in the best interests of customers — this means good practices and processes, efficient and accurate systems, controls and training around customer needs.
I’d also like to point out that we have no truck with the argument that if customers are disadvantaged “accidentally” (for instance by systems failure) then all is forgiven. In most instances, within mainstream financial services we do not find evidence of deliberate wrongdoing but we do see sloppy or poorly designed and implemented practices. We will judge you for poor systems and poor practices that damage your customers — whether they have complained or not.
On a positive note, some of the most important feedback we get from our monitoring visits and from our Conduct & Culture work came from those people working in frontline, customer-facing teams. These people clearly care a lot about their customers and how to serve their needs best. These teams were often the most frustrated at some of the ‘misaligned incentives’ they had to operate under. It was really comforting to hear that passion.
But it’s not just the frontline workers – we’re also seeing that boards and executives care too, they need to keep going with this work, which means having a good organisational set up to deliver good customer outcomes.
To conclude, we know that between now and the introduction of the new conduct regime under the CoFI Bill, there are a lot of hard yards ahead for all of us. This is likely to be tougher with the impact of the economic downturn.
But I am confident we’re all moving in the right direction and that our goals and interests are aligned with those of the industry, and that all New Zealanders will benefit from a strong, confident and customer-focused financial services industry.
