FMA assesses CoFI product and service reviews

On 9 December 2025, the Financial Markets Authority (FMA) released a report summarising the findings from its thematic review of how financial institutions review the suitability of their products and services for consumer requirements and objectives.

These reviews form part of the minimum requirements of an effective fair conduct programme under New Zealand’s Conduct of Financial Institutions regime (CoFI), but we consider that it is also informative for participants in the wider financial services sector.

The FMA’s review sampled ten deposit takers and ten insurers of varying size, nature and complexity. Participants’ reviews were assessed across six core themes. We set out below the key findings, including what the FMA considers to be “good practice” and key “risks” across each theme.

 

1. Purposes and objectives

The FMA found that participants’ reviews were undertaken to:

• confirm the suitability of products and services for consumer needs and objectives, and assess performance to identify issues;
• inform decisions on product enhancement, rationalisation or withdrawal;
• ensure distribution methods remain fit for purpose; and
• manage risk, comply with legal and regulatory obligations, and maintain commercial viability.

Good practice:
Explicit consideration of consumer requirements and objectives alongside other compliance or market-focused considerations.

 

2. Scheduling and prioritisation of reviews

Generally, participants scheduled reviews in advance every one to three years, depending on the risk rating of the product or service, whether the product was on- or off-sale, and other characteristics such as complexity or number of customers.

Risks:
Where participants only conduct reactive reviews triggered by specific events (for example, a material product change). The FMA warns this approach allows issues to go undetected and does not meet the requirement for “regular” reviews.

Good practice:
Scheduled reviews combined with a risk-based approach, ensuring risks and issues are identified and managed as they arise.

 

3. Scope of reviews

The scope of reviews varied across participants, ranging from narrow checklist-based assessments to full lifecycle reviews. Common review elements included:

• consumer experience;
• distribution strategy;
• performance indicators;
• risk management and compliance (including CoFI);
• incentives and conflicts of interest; and
• staff capability and systems.

Risks:
Narrow review scopes that fail to consider the wider consumer experience, including the impact of intermediaries and incentives on product and service suitability.

Good practice:

• lifecycle coverage from product design through to distribution and administration, recognising that issues in these areas affect overall suitability;
• using a mix of quantitative and qualitative methods;
• reviewing incentives to ensure they do not adversely impact consumer interests; and
• considering intermediary capability where relevant.

 

4. Who leads and contributes to reviews?

Larger financial institutions typically have dedicated product teams leading reviews. In smaller institutions, reviews are often conducted by risk and compliance functions and/or senior leadership.

Risks:
Intermediaries are often not engaged in the review process.

Good practice:

• where intermediaries are used, seeking their input, as their feedback can provide valuable insight into the consumer experience; and
• having clearly defined roles and responsibilities to support effective monitoring and risk management, as required by the fair conduct programme minimum requirements.

 

5. How financial institutions assess whether consumer requirements and objectives are met

The FMA found that participants assessed suitability using a mix of quantitative and qualitative inputs, including:

• consumer and stakeholder feedback (including from staff and distributors);
• consumer behavioural research;
• market analysis;
• product performance metrics such as sales and conversion rates; and
• complaint and issue trends.

Risks:
Assessing suitability only once during a product or service’s lifecycle, without accounting for changing consumer needs.

Good practice:

• actively understanding consumer requirements and objectives through the review process;
• a dynamic approach to assessing suitability, accounting for the evolving requirements and objectives of consumers. This includes considering particular vulnerabilities of groups of consumers; and
• clearly articulating who the product or service is for, what needs it meets, and any criteria for suitability.

 

6. How and to whom findings are reported

Larger participants typically used product governance committees to oversee reviews, while smaller or less complex participants relied on existing risk committees. Many larger participants engaged boards only when specific triggering events occurred. Smaller participants tended to involve boards throughout the review process.

Risks:

• reporting review findings to the board only when material issues arise, resulting in boards relying on “no news is good news”; and
• failing to notify consumers before implementing changes to products or services following reviews.

Good practice:

• reporting the scheduling, completion and findings of reviews to boards to support full oversight throughout the process;
• implementing formal processes to identify affected consumers and communicating review outcomes and next steps; and
• ensuring actions from reviews are implemented and effective.

 

Our view

We consider the key takeaways to be:

• Consumer outcomes first: Make consumer requirements and objectives explicit.
• Regular and risk-based reviews: Maintain a review schedule, supplemented by risk-based adjustments and reactive triggers.
• Comprehensive scope: Cover the full product lifecycle, consumer experience, distribution, incentives, technology and capabilities.
• Dynamic suitability assessments: Assess suitability on an ongoing basis to reflect evolving consumer needs and vulnerabilities.
• Governance and accountability: Define clear roles, and ensure the board is aware of the review at each stage.
• Action and communication: Track actions to verified effectiveness and communicate outcomes clearly and promptly to affected consumers and intermediaries.

Please get in touch if you have any questions regarding the FMA's report or CoFI product and service reviews more generally.