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The Financial Markets Authority (FMA) has published its findings from the Access to Financial Advice Review, initiated in 2025 and completed this year.
They identify some ongoing implementation challenges with the 2021 Financial Services Legislation Amendment Act (FSLAA) reforms and shine a light on how the rapid adaptation of generative AI is putting pressure on the existing regime framework.
We consider some degree of regulatory change is inevitable, but at this stage it is too early to say what changes may be proposed.
Key themes
The findings coalesce around five broad themes, on which the FMA intends to undertake further consultation. They are that:
- greater focus is required when designing the nature and scope of financial advice to ensure that it is ‘right-sized’ to the needs of different consumers, circumstances, and channels
- ongoing customer advice and support must be available
- banks holding a Financial Advice Provider (FAP) licence are tending to take a conservative approach to offering advice through their own advisers and nominated representatives, particularly for everyday products
- an advice gap is developing around the decumulation of retirement savings, and
- Māori continue to face barriers in accessing financial advice.
Further specific observations of interest from the report include that:
- some banks appear to be providing low rates of financial advice on basic bank account products, term deposits, and mortgages
- smaller FAPs – rattled by uncertainty regarding their capacity to meet the obligations of the Code of Professional Conduct for Financial Advice Services (Code) – are tending to focus on broader scoped advice with more complex advice processes, to the detriment of smaller or ‘unsophisticated’ clients who are regarded as uneconomical to deal with
- although not expressly stated, the report’s comments about the difficulties in tailoring ‘nature and scope’ seem to be an implicit admission that the removal of the distinction between class and personalised advice has had unintended consequences
- the FMA wants to understand real-world use cases for new technologies and see more innovation and AI adoption. It acknowledges that the lack of regulatory support may be creating a disincentive to use digital solutions, in particular the impact of disclosure on customer engagement and the practical difficulty of meeting record-keeping obligations for digital advice providers
- the FMA is being pushed to release guidance on how competency equivalence under the Code can be demonstrated by way of alternative qualifications or experience.
Consumer surveys
Although the consumer survey found that 28% of New Zealanders had used a financial adviser in the past 12 months, it also identified some key challenges to accessing advice, including:
- a preference to rely on informal sources of information and guidance
- a lack of understanding of what financial advice is and where it can be accessed, especially among women
- less engagement with financial advice services across some demographics, and
- perceived affordability concerns, with some consumers unwilling to pay for financial advice.
Other interesting survey results:
- the use of financial advisers declined with age – 37% of 18 to 29-year-olds surveyed had consulted a financial adviser in the last 12 months against 21% of 50-59 year olds and 17% of 60+ year olds
- 35% of adults had never received financial advice, with the incidence much higher among lower income earners, and
- around half of respondents indicated some level of trust in receiving AI advice across most product types.
Our view
As we noted in our introductory comments, we consider that further regulatory reform is desirable. In particular:
- the dynamic nature of generative AI and the risk of hallucinations do not fit easily within the conduct and competency obligations that apply to regulated financial advice
- many AI tools are operated by entities that are not licensed and regulated by the FMA, yet often still provide financial advice on prompting from a user. The lack of suitable FMCA regulation in this context, leading to an unwillingness to enforce the current laws against AI tool operators, denies the client the full protections of the law, and
- the current state of affairs may be slowing the uptake of digital advice facilities in New Zealand, in clear conflict with the FMA’s desire to promote innovation in the financial advice sector and accessibility to compliant advice services.
Further regulatory change may flow from the thematic review of financial advice business models and remuneration structures signalled by the FMA in the 2025/26 Financial Conduct Report, although we are still awaiting terms of reference and a commencement date. (See our commentary here).
Next steps
The FMA is going to undertake further targeted consultation on the questions set out in its findings. This will include targeted roundtables with FAPs, professional bodies, deposit takers, insurers, fintech providers, education providers and consumer groups. Chapman Tripp will be actively participating in these meetings.
For assistance with this consultation or any questions, please contact one of our experts.
