.svg){kind=small}
The Conduct of Financial Institutions (CoFI) came into force on 1 April 2025 for banks, non-bank deposit takers and insurers. Product (and the policies, systems, processes and controls that support it) is at the heart of CoFI as it is ultimately what customers engage financial institutions for. So it was not surprising to see product reviews as one of the FMA’s priorities for the 2025/26 year.
Under CoFI, Financial Institutions are required to have a Fair Conduct Programme that ensures they regularly review products to determine whether they are likely to continue to meet the requirements and objectives of consumers.
The response across the market has been to develop structured periodic reviews presented to management or some form of governance committee that confirms if the product is meeting objectives.
That said, there are a range of approaches to product reviews.
At times they are seen as compliance function with boxes to tick. This fails to see the value in product reviews that can identify risks or issues, and also opportunities for the business to explore. For example, there could be underutilised distribution channels, churn that should be addressed, products that are no longer commercially viable or shifting consumer dynamics that require investment in features to continue to meet consumers needs and objectives.
At times they are seen as a mechanism to validate system configuration, communications, policy, processes, training and anything else associated with the product. A silver bullet for isolating issues. It is important to remember that financial institutions rely on other systems, processes and risk management practices to provide confidence that business rules are being applied correctly and information is up to date. Model management, quality assurance, change management, incident and issues management are all there to avoid errors and poor outcomes and to quickly identify root cause issues for remedy when things do go wrong. Obviously, the practicalities of operationalising as a “silver bullet” approach would be very cumbersome and come at the sacrifice of other activities.
Product reviews need to consider the product target market and how it flows through product design, distribution methods, customer servicing and the results that come off the end of that value chain (e.g. product performance, utilisation, complaints, incidents). This helps validate the appropriateness of the product market fit (also the portfolio positioning), the distribution channels (including the training and communications) and in life servicing (including communications and features). Often products don’t consider how the product is embedded across the whole product value chain (e.g. systems, distribution, operations, reporting etc). This can result in products without clear target markets, great products that aren’t reaching the target market, products being mis-sold to customers or products that customers struggle to engage with. Looking across that value chain, anchored by the product’s customer target market, will validate or expose these risks and opportunities.
A product review will often help inform the business about potential risks or opportunities for further investigation and validation, rather than conducting a root cause analysis or designing a solution. As noted above, the practicalities of trying to provide conclusive findings off the back of a review will be fraught. Examples of where it may inform further activity include potential issues arising from complaints or incidents that require deeper investigation, customer experience challenges that necessitate further research based on utilisation or value analysis of emerging features, or observed potential gaps. These may result in some form of intervention, such as a changes to the product, system, training, communication, or supporting processes. But they may also conclude that the current position is acceptable. This investigative and continuous improvement behaviour, along with the product review, helps provide confidence that the product is meeting the needs and objectives of consumers.
In keeping with CoFI, the reviews can be proportionate and risk-based. The risk driver can vary though. It may be material shifts within the market, the emergence of incidents, poor performance or utilisation or an enduring risk rating attached to the complexity of the product or impact or potential harm it has for consumers.
This is the real value in a review and arguably the most important behaviour a product review fosters. It is the opportunity to step back from the day-to-day management of a product and attempt to critique objectively if the product is providing value to the business (from compliance, risk and commercial perspectives) and customers (notably whilst also considering the wider portfolio) and if it has the infrastructure it needs to be the best it can be. All organisations will have a list of a thousand and one things they want to/could do, but the decision on what to prioritise and what not to do should be a conscious choice. The product review can ensure that those decisions to pursue uplift, or not, are made knowingly.
Product reviews need to be value-added, responding to risks and opportunities. They are an opportunity to reflect and identify areas where the financial institution could be doing better by customers and themselves.
It is important to remember that product reviews are part of a toolkit to support confidence that financial institutions are meeting the needs of their customers and providing the outcomes customers signed up for.
If you would like to have a chat with Mosaic about product review, product governance, product strategy or CoFI, please just drop us a line.
