Financial Advice New Zealand Chief Executive, Katrina Shanks, explores the questions advisers need to ask themselves to make sure they choose the right licensing pathway for their advice business.

‘Be Bold. Be Brave.’ A simple statement that set the tone and theme for Conference this year, and the many conversations I had with advisers during the two-day event in August: inspiring conversations that showed me that a growing number of advisers are approaching regulatory change not simply as a compliance requirement, but rather as an opportunity to take a good look at their business and the opportunities to be even better – for themselves, for the sector and for their clients.

Licensing and qualifications, delivering to Code Standards and more – the new regime asks advisers to make some important decisions about their future.

One of the key decisions you will have to make is licensing. Of course, much has been said and published about licensing options, but many advisers have yet to make a decision about the best way forward for their business.

Embracing change means being prepared, so let’s take a few minutes to explore this key decision that is fast-approaching.

Licensing – what’s the right option for your advice business?

If you have yet to land on the right licensing option for your business, here are some key questions to consider:

  • Do you want to have your own licence – i.e. do you want to become a Financial Advice Provider (FAP)?
  • Do you want to be under someone else’s licence – i.e. sit under someone else’s FAP, for example your Group?
  • Do you want other advisers to sit under your licence? If yes, what is the risk and liability you are prepared to be exposed to with other advisers under your Licence?
  • Will you have the Level 5 qualification?
  • Will you have advisers under your licence that are Level 5 qualified, or advisers who are not Level 5 qualified? Or a mix? This is a key decision that will determine the level of process and controls you will need to evidence to the regulator.

If applying for a FAP licence you will need to have a good understanding of the type of services, products and advice you provide to your clients.

In the transition period, existing advisers and those relying on the competency exemption, are able to continue to provide the advice they were legally permitted to provide under the FA Act. Otherwise, advisers may provide any form of advice as long as they meet the competency knowledge and skill requirements of the new Code (Please note: updated content).

Transitional Licensing opens on 4 November this year. Once you have applied for your licence the process of approval for the transitional licence should only be a few days.

At the end of the application process (expected to be June 2020, date to be confirmed), the FMA will provide an activation date for Transitional Licenses.

Why is this important?

On this date – the activation date – advisers will need to be compliant with the eight Duties in the Legislation. And this of course means that you need to know how the Duties relate to your business structure – i.e. your chosen licensing model and related obligations.

It is important you have a good understanding of how you know your business processes are working. Compliance assurance will be an area the supervisors will have a strong focus on.

And here’s another important note for advisers in growth mode, planning on employing staff in the near future: You can only employ financial advisers who either have a qualification (to Level 5 minimum) or are already practicing, during the transitional licencing period. The only exception is if you currently have a QFE status.

“…turning change into an opportunity for success means being prepared, so carefully considering your licensing options now is key.”

Once again, turning change into an opportunity for success means being prepared, so carefully considering your licensing options now is key. We know many advisers are gearing up by starting the Level 5 qualification, instead of having to rely on FAP’s procedures, systems and controls which demonstrate Level 5 outcomes.

This week I enrolled to do one of the compulsory papers myself. I am excited to start some formal education as a way of growing my personal, technical and business skills. The concept of being a lifetime learner resonates well with who I am.

Financial Advice New Zealand has prepared a range of resources to help advisers get ready for the new regime, including five Workbooks on the eight Duties in the new legislation:

Workbook One

Client Understanding, Nature and Scope of Advice

Workbook Two

Competence, Knowledge & Skill

Workbook Three

Exercise Care, Diligence and Skill

Workbook Four

Priority to clients’ interests

Workbook Five

Comply with the Code of Conduct

Make information available

Offers that contravene Act

False and misleading statements

For any advisers who have yet to consider their licensing options and are not sure how to go about it, we welcome you to get in touch with the team at Financial Advice New Zealand. We now offer a helpdesk for transitional licensing on Wednesdays from 9-12 on ph 0800 432 101 and we will answer your questions. We’re here to help.

Katrina Shanks is the CEO of Financial Advice New Zealand. You can contact Katrina on 04 499 8062 or