By Gareth Vaughan
Set up in 2011 to help restore the public's confidence in financial markets after the meltdown of the finance company sector, the Financial Markets Authority now - almost - has its key tool finalised. And CEO Rob Everett has a simple message for those working in the financial services sector.
Basically it is to put the needs and expectations of their customers first.
The massive programme of implementing the Financial Markets Conduct Act, described by two Ministers of Commerce as a once in a generation shake-up, and by one as a new era, reaches its conclusion later this year with fund management licensing.
"At that point we have the full remit, we have the full horizon," Everett told interest.co.nz in a Double Shot interview.
"So the focus there will be on how a modern supervisory regulator influences behaviour, influences conduct, how we look at what's going on in the licensing sector so that we can target our resources properly. So for me it's about how we develop the relationship that licensing starts into a relationship with the industry, where we know we need to be looking, we know we need to exert our influence, and everyone understands what we're trying to achieve," Everett said.
"So it becomes a steady state of looking at conduct, looking at systems and controls, looking at governance. Where hopefully the legislative framework stays in place for a while [so] people can see with some consistency and stability that it's not going to change. I think that's really critical, and that we get to start moving the needle on the dial in terms of how financial services treats its customers."
Lack of trust
Everett points out that internationally there's a lack of consumer trust in the financial services sector. This follows the likes of the collapse and bailout of banks in the Global Financial Crisis, benchmark interest rate rigging scandals and conduct and pay controversies. Everett said against this backdrop it's important New Zealand's financial services sector is not complacent.
"Somewhere like New Zealand the industry can make decent money effectively by just turning up because of the competitive nature of the market," he said.
But there ought to be a "relentless" focus on the customer experience and whether financial service providers are delivering on what the customer both needs and expects.
"If the industry approaches things with that mindset my own view is that most of the rest falls into place. And some of the heavily prescriptive legislation you see in the States, for instance, shouldn't be necessary," Everett said.
"But that requires a regulator like us to be convinced that at the very top of all of those firms that's actually the mindset and that will feed down through the organisation. So for us it's that relentless focus on if things are going wrong at the ground level, which they often do, why is that, how are they reacting to it, what are they changing to make sure it doesn't happen in the future. So I think it's about an industry not being complacent about the fact that most people have to interact with financial services in some way and actually making that more of a choice."
'With some of the asset bubbles we've got now the down could be quite steep'
And against the backdrop of a red hot property market and a share market at record highs, Everett said in the good times it's crucial to focus on how customers and investors are being treated in order to survive a downturn.
"Because as a relatively new regulatory environment what we really don't want to see in a downturn is to see everyone go back and ask the same questions they were asking five, six years ago about how could this have happened. So people need to accept that markets go up and down and that's a normal part of the investment cycle. And with some of the asset bubbles we've got now the down could be quite steep," said Everett.
Retail investors need to feel even in a downturn that it's a normal market environment, damage is as limited as possible, and the downturn hasn't been driven by poor treatment of customers, Everett added.
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