The Financial Markets Authority (FMA) has released its findings on understanding fairness in financial services which can be viewed here.

The consumer survey asked around 3,000 New Zealanders to respond to 33 scenarios about fairness in financial services and in New Zealand more generally, and rate this fairness on a scale. The core purpose of the FMA is to promote and facilitate fair, efficient, and transparent financial markets and to promote confident and informed participation in financial services. 

Who should read this? Why?

Financial Service Providers (FSPs) and their Boards should familiarise themselves with the FMA’s findings and reflect on how the findings align with the way they treat their customers and investors fairly, and any ways this treatment can be improved. For FSPs covered by the Financial Markets (Conduct of Institutions) Amendment Act 2022 (CoFI Act), the FMA’s findings may be useful in the development of their Fair Conduct Programmes (FCPs). Consumers will also benefit from reading the findings, as they should be informed about what the FMA considers to be fair treatment in accordance with its goal of providing markets which are fair for providers, investors, and consumers. The FMA is also looking to spark discussions and reflections on fair conduct within financial services. 

What does it cover?

The FMA’s survey, which ran from 14 June to 4 September 2023, presented survey respondents with one of two scenarios – being ‘unfair risk scenarios’ or ‘neutral scenarios’. These scenarios included were based on ‘real-life’ situations that New Zealanders could experience with FSPs. Respondents were then asked to rate the fairness of the scenarios on a scale of zero (not fair at all) to 10 (very fair), where any rating between zero to three is considered to be unfair conduct. 

The key questions that the FMA wanted to understand from the survey were the average New Zealander’s feelings about fairness in financial services, and if there were consistent opinions about fairness of specific situations – with the identification of themes behind those opinions. The survey assessed New Zealanders’ perception of fairness generally, in financial services, and by age and ethnicity. 

Key findings from the survey found that, of the participants:

• 81% believe that everyone should have the same opportunities in life;
• 72% expect fair treatment from their FSP;
• 69% believe their KiwiSaver providers treat them fairly;
• 63% believe their bank treats them fairly; and 
• 57% believe their insurance provider treats them fairly. 

Overall, the FMA’s findings determined that many New Zealanders agree on what is fair and unfair, in most situations. Of the 29 unfair risk scenarios, 26 were more likely to be evaluated as unfair by survey participants, while all four neutral scenarios were evaluated as being fair. The FMA’s findings also highlighted a strong difference in the perception of fairness between age groups, where those 18-24 years deemed far fewer scenarios to be unfair than those 65+ years. While some minor differences were found between ethnicities, opinions on fairness did not vary significantly between ethnic groups. 

Our view 

We see the FMA’s findings as a good opportunity to gain an understanding of the opinions of New Zealanders in accordance with the role and purpose of the FMA to promote and facilitate fair, efficient, and transparent financial markets. The findings provide good insight into areas where FSPs can continue providing fair services to consumers and investors, and where there is opportunity for improvement. We also see this as a good opportunity for the deployment of the FCPs under the CoFI Act. We encourage all FSPs to reflect on the FMA’s findings and contribute to the wider industry discussions. 

Next steps

The FMA plans to publish more research on additional topics important to the financial services sector, in the future. We will provide updates as we learn more about the FMA’s further research. 
 

This article was co-authored by Andrew Walker, a Law Clerk in our Financial Services team.