Compliance pressure bites, so how can advisers stay ahead

Compliance in the New Zealand mortgage advice industry has shifted from being a background obligation to a central pillar of day-to-day operations. And while most advisers agree the intent of regulation is sound, the growing emphasis on evidencing advice, documenting suitability and proving good customer outcomes has introduced a new set of pressures - particularly around time, systems and consistency.

For many, this means that the primary challenge is often no longer about understanding what regulators want but keeping up with the practical requirements of proving it.

Stuart Wills, adviser at Mortgage Managers, believes the industry has reached a point where compliance itself is not necessarily the difficult part, it’s the way it must be recorded.

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“Most of it is common sense and good advisers have been meeting or exceeding this for years,” he says. “The difference is we now need to record everything in a manner that may not fit with how we would have done things in the normal course of business.”

Wills adds that advisers are often required to adjust internal processes to fit a regulatory environment that can be vague, with limited clarity available when questions arise.

The most common compliance challenges

Both Wills and Benchmark Mortgages director Manshil Krishna point to documentation demands as one of the biggest pain points for advisers.

“The challenge is no longer understanding regulation, it’s managing the growing level of process required to clearly evidence good customer outcomes,” Krishna says. “Certainly, expectations around verification, documentation quality and suitability analysis have increased significantly.”

In practice, that means advisers are now spending more time demonstrating why a recommendation is appropriate than simply arranging the transaction.

Wills highlights several areas where ambiguity has created difficulty, including defining what counts as a “client” for reporting purposes. He notes that advisers often hold databases full of contacts (ranging from old clients to warm leads) yet the Financial Markets Authority (FMA) has been unable to provide a clear definition.

“In the end we had to create our own definition, document the definition and create a way to extract the ‘clients’ from our database so we can report on them,” he says.

Another key shift is the removal of language around ‘class advice’. While advisers can still provide general information, Wills says advisers must now be extremely cautious about what they say publicly, including at events or online, to avoid creating the impression that personal advice has been provided.

There are also practical technology challenges, such as clients communicating through multiple messaging apps that don’t integrate with CRM systems, making it difficult to capture and store communication trails.

What regulatory shifts are coming next?

While neither adviser points to a single major regulatory overhaul on the immediate horizon, both suggest the industry should expect continued change.

Wills says brokers must accept that regulatory expectations will continue evolving.

“I’m sure that this space will forever be changing and that’s fine,” he says.

Krishna believes the FMA’s ongoing focus on access to financial advice will remain a major theme - not just from a consumer protection perspective, but from an industry sustainability standpoint.

“The key issue is not just stronger consumer protection, it’s ensuring advice remains efficient, scalable and accessible,” he says.

How compliance has reshaped the broking profession

The last few years have transformed the way advisers operate. Compliance has become more structured, and expectations around evidence, disclosures and oversight have increased. Wills says the biggest day-to-day shift has been time.

“Even 30 years ago we always kept files and notes, but now we are expected to keep more extensive notes,” he says. “We need to provide more documents to clients and make sure that we retain more information in a format we can easily extract.”

He adds that the client relationship itself has not changed dramatically, but formal disclosures, particularly around commissions and complaints processes, are now far more prominent.

Krishna describes the shift as a broader professionalisation of the industry.

“Advisers are working within more structured advice frameworks, with greater governance around recommendations.”

“The role has shifted from transactional deal facilitation to more strategic financial guidance.”

Preparing for future compliance requirements

Both contributors agree the best approach is proactive investment in systems and discipline, rather than reactive box-ticking.

Krishna says advisers who will succeed are those who treat compliance as a core business function.

“Investment in technology, consistent advice processes and disciplined file management will be critical,” he says.

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Wills agrees but believes the next phase will be defined by automation and AI tools that allow advisers to focus on advice rather than administration.

“We are in the early stages of using a combination of transcription and AI to ensure that we can meet all the requirements,” he says.

Mortgage Managers are using transcribed phone calls and online meetings, then applying AI tools to generate file notes and compliance documentation, reducing the need for advisers to manually type extensive records.

Wills says they are also developing AI-supported processes for applications and reviews, including identifying irregularities in credit checks and bank statements.

“Any abnormalities can be picked up in minutes rather than the manual process which can be hours.”

Lenders and advisers - improving collaboration

While lender-adviser relationships have strengthened around responsible lending expectations, there’s still evidence of inefficiencies created by inconsistent interpretation.

Wills points out that lenders occupy a unique position as both ‘suppliers and competitors’, and historically advisers have had limited influence over how banks implement compliance processes.

“In most cases this means things are less efficient as each bank has a different interpretation of what is required,” he says.

And Krishna believes there is still room to improve consistency across the market.

“There are stronger alignments today around responsible lending outcomes and conduct standards. However, there is still an opportunity across the market to improve consistency in documentation expectations and reduce duplication. 

“Greater collaboration in this area would support both efficiency and borrower experience while maintaining robust governance.”

Are compliance requirements improving outcomes?

The answer, according to both advisers, is nuanced.

Krishna believes compliance has strengthened accountability and transparency, improving the sustainability of lending decisions. However, he warns that increased process can create friction for borrowers with complex circumstances.

Wills takes a more critical view, saying he has not seen strong evidence that outcomes have improved overall.

“Initially we probably saw some of the ‘ratbags’ leave the industry, which was good, but we also saw a lot of good advisers leave too,” he says.

He believes some advisers have narrowed their scope of advice to keep documentation manageable, which may reduce the options and quality of guidance available to borrowers.

Training, professionalism and customer experience

Both advisers see training as essential, though Wills questions some of the available industry education, particularly when it focuses too heavily on lender products rather than advice strategy and solutions.

“Advisers tend to get most of their training from the suppliers and it's more about the actual lenders products rather than about giving advice and creating solutions. The other training is about how to ensure that the adviser is compliant and again, that does not help improve the level of advice and solutions.

“In our business we have focused additional training on live case examples and solutions, but from what I hear that is not common practice.”

Krishna believes continuous professional development is now non-negotiable.

“Regulatory expectations, client behaviour and technology are all evolving,” he says.

Ultimately, the ability to maintain compliance while delivering a smooth customer experience comes down to structure and communication. Krishna says when clients understand what is required early, compliance becomes part of a professional journey rather than an obstacle.

Wills agrees, noting that Mortgage Managers recently went through an FMA review, which helped refine their internal systems and improve how they record and extract compliance evidence.

Looking ahead, both see the next phase of compliance being shaped by smarter systems and stronger governance - and possibly AI playing a key role in reducing friction. And the challenge for the industry will be ensuring compliance supports good advice, rather than restricting it.

“The industry is entering a phase where the value of financial advice needs to be more clearly demonstrated,” says Krishna. 

“Adviser numbers have declined following the introduction of the new regulatory regime, which increases the importance of building sustainable advice models. So the next evolution of broking will be defined by advisers who combine strategic thinking, technology and disciplined governance to consistently evidence strong customer outcomes, while still keeping advice practical and accessible.”