FMA cracks down on deVere for license breaches

FMA cracks down on deVere for license breaches | Insurance Business New Zealand

Insurance News

FMA cracks down on deVere for license breaches

Shortcomings in firm’s practices outlined

Insurance News

By
Roxanne Libatique

The Financial Markets Authority (FMA) – Te Mana Tātai Hokohoko – has issued a public censure against deVere New Zealand Limited, an Auckland-based financial services firm, for failing to comply with its Financial Advice Provider (FAP) licence obligations.

DeVere offers advice on insurance, investments, and retirement planning, including KiwiSaver and UK pension transfers.

A client complaint, now resolved, prompted the FMA to review deVere’s client files. The review revealed several shortcomings in deVere’s practices:

inadequate record-keeping for advice provided to clients
inability to demonstrate the suitability of recommendations made to clients
failure to ensure clients comprehended the financial advice and its limitations
inappropriate limitation of the advice’s scope without clear communication to clients
insufficient care, diligence, and skill in delivering advice

The FMA determined that deVere’s advisers did not properly consider clients’ investment experience, financial product knowledge, or risk profiles when advising on pension transfers and investment products. Some recommended products were complex and carried higher risks. Advisers did not assess whether these products were suitable or if clients fully understood the associated risks, sometimes exceeding clients’ risk tolerance.

deVere admits to lacking proper documentation

DeVere conceded that it lacked proper documentation, including records of discussions about the pros, cons, risks, and benefits of switching from clients’ current plans to the recommended platforms.

The FMA noted no evidence showing that deVere considered advice from UK licensed advisers who recommended against switching from defined benefit pension plans or documented clients’ understanding of the disadvantages and risks, such as losing a defined benefit scheme’s income stream.

“FAPs have a duty to comply with the standards of ethical behaviour, conduct, and client care as set out in the code of conduct,” said Peter Taylor, director of specialist supervision and response at the FMA. “When advice relates to switching one pension product to another, we would expect an appropriate analysis and comparison to be performed considering the complexity of the product. In respect of the pension products deVere advised upon, these decisions made by customers are crucial to their retirement. Significant customer harm may occur if the advice is not suitable, and the adviser has not taken reasonable steps to ensure the customer understands the advice and the risks associated with it.

“DeVere’s conduct falls short of the standards we expect and had the potential to cause harm to the client’s long-term future as it involved irreversible decisions about their retirement savings.”

deVere vows to improve compliance and record-keeping

The FMA welcomed the steps deVere has taken to improve compliance and record-keeping.

“Nevertheless, we consider deVere’s breaches warrant a public censure. Censures hold firms to account while serving as an important reminder of their obligations to their customers. I encourage all FAPs to take note of this censure and the FMA’s expectations that they meet the standards required,” Taylor said.

DeVere must submit an action plan to the FMA detailing steps to remedy the breaches and ensure future compliance.

The FMA said it recognises deVere’s cooperation, commitment to meeting obligations, and efforts to address the breaches. It will monitor the company’s compliance and action plan completion.