The Financial Markets Authority (FMA) – Te Mana Tātai Hokohoko – has censured Go Financial Solutions Limited for failing to comply with several obligations under its financial advice provider (FAP) licence.
Go Financial Solutions is a Christchurch-based FAP that provides advice on health, life and business insurance and mortgage lending. Go Financial Solutions’ primary clientele is the Filipino community, including non-residents on working visas.
During a monitoring review earlier this year, the FMA found that Go Financial Solutions:
- Had inadequate record keeping in relation to advice given to its clients
- Failed to gather sufficient information about a client’s circumstances and was unable to demonstrate that recommendations made to clients were suitable
- Failed to ensure its clients understood the financial advice they received
- Failed to exercise care, diligence and skill when providing financial advice to its clients.
In particular, the FMA observed instances where advisers failed to make reasonable enquiries about or take into consideration clients’ medical circumstances when advising clients to acquire a new policy or replace their existing life policy. Further, the FMA observed instances where a more detailed rationale was required than was given to support the recommendation made by advisers to clients to sign up with a particular provider, or to switch providers. In the absence of this rationale, the FMA considered Go Financial Solutions failed to assess or review recommendations to a level that provided a reasonable basis for the recommendation.
Go Financial Solutions had inadequate records in relation to financial advice given to retail clients. Of the client files reviewed, there were instances of Go Financial Solutions having incomplete details about the person to whom financial advice was given along with any information it received from its clients, as well as incomplete nature and scope disclosures. Dates in the file notes for clients were ambiguous and inconsistent making it difficult to pinpoint when alleged client interactions took place.
The FMA also found that Go Financial Solutions advisers failed to take reasonable steps to ensure clients understood the implications of the financial advice. As an example, Go Financial Solutions recommended a client opt for a level premium structure for their Trauma and Life Cover. Then, purportedly at the client’s request, this was changed to a stepped premium structure. Go Financial Solutions could not provide evidence that the client was informed of the consequences of changing the structure or that it explained the trade-offs between the two premium structures.
These failures were a breach of the obligations a licenced FAP must abide by under the Financial Markets Conduct Act 2013.
FMA Director Specialist Supervision and Response Peter Taylor said: “Financial advisers are required to exercise care, diligence, and skill in their work, it is clear from the conduct we observed in our monitoring at Go Financial Solutions that this did not occur. These failures were serious and had the potential to cause harm, particularly for clients with vulnerable characteristics like English as a second language. Clients are entitled to trust their financial adviser and its conduct breached that trust and could erode the public’s confidence in financial advice providers.
“We expect FAPs to meet their obligations and to put good customer outcomes at the core of their business. Consistently delivering good outcomes requires sound systems, controls, record keeping, being disciplined about meeting compliance obligations, and good disclosure. It needs to be part of an organisation’s culture, including setting clear expectations and leading by example.”
Go Financial Solutions is required to submit an action plan to the FMA outlining the steps it will take to remedy the breaches and to ensure it does not breach its licence obligations in the future. The FMA acknowledges Go Financial Solutions’ cooperation to date, and its efforts to remedy the breaches. The FMA will monitor Go Financial Solutions’ compliance and completion of the action plan.
