As the June 29 deadline for obtaining a transitional licence approaches, just 275 financial advisers have been issued a licence, says the Financial Markets Authority.
The relatively low number, compared to the country’s 6,500 registered financial advisers, isn’t concerning the industry regulator, though.
FMA spokesperson Andrew Park says the organisation “…is comfortable with the numbers” and says there is no target number for it to meet.
However, some in the retail sector are concerned. Among them is Kepa CEO, Brendon Neal, who says a significant portion of the adviser population without an FAP home post June 29 would be a major failure:
If there’s a backlog of applications and delays in processing …then the alarm bells should be ringing…
“The FMA has been at pains to point out that the transitional licensing process is ‘streamlined’ and that processing times would be low – hence many advisers haven’t rushed to apply,” he said.
Neal points to the FSC’s Get in Shape 2020 conference series this month at which the FMA said some applications were taking up to 60 days.
“So all of a sudden time has all but run out,” he says.
“Kepa always anticipated a smaller proportion of our member base would seek to join our transitional Financial Advice Provider (FAP) given the supposed ease of transitional licensing, and the absence of guidance about the obligations and process to obtain a full license.”
Neal says the FMA cannot rely on larger FAPs like his to bring hundreds of financial advisers through.
“If there’s a backlog of applications and delays in processing times already, then the alarm bells should be ringing.”
Financial Advice NZ CEO, Katrina Shanks, is also surprised at the slow uptake:
“I would have expected to see a big pick-up of financial advisers seeking transitional licenses,” she says.
“I think there has been a ‘wait-and-see’ situation happening commercially, but there is some clarity in the marketplace now, so advisers can make a decision about how they are going to be licensed.”
I would have expected to see a big pick-up of financial advisers seeking transitional licenses…
However, Shanks says some people have been caught out when applying for a license.
“Traders have to register their companies to be an authorised body – so the authorised body can be attached to a Financial Advice Provider.
“We are seeing in the Companies Office part that applicants are being asked for additional information. And that is causing some delays as advisers get the technical side of their application correct. But we are not talking huge volumes.”
Shanks says the FMA has typically processed an application within two days to a week.
“But as it gets closer to the cut-off date of 29 June I expect there will be delays in processing.”
…if the uptake of transitional licenses doesn’t ramp up then advice activity may be impacted
Tony Arthur, chief commercial officer at Partners Life, says if the uptake of transitional licenses doesn’t ramp up then advice activity may be impacted.
“However, we think the risk is small, because companies like us will ensure that active advice businesses that we work with transition well, and are able to support customers, and the market, during the transitional licensing period and beyond.”
Arthur says some advisers are waiting for more information from the FMA.
When delegates …were asked if they’d made a decision on getting a license only half the people put their hand up…
Rod Severn, CEO of training provider Professional IQ College, says while there are lots of advisers who have not yet made up their mind, he expects up to 10% of them to leave the industry.
“When delegates at the Get in Shape roadshows were asked if they’d made a decision on getting a license only half the people put their hand up,” says Severn. “So there are lots of advisers out their who are yet to decide on which way to go.
“I think we’ll see between 5% and 10% of those in the industry get out; this will be a catalyst for some of the baby boomers.”
Katrina Shanks says 48% of advisers surveyed by Financial Advice New Zealand last week plan to sign-up with a single-adviser FAP, and 21% plan to be in a two to five-person FAP. 15% said they were going into a FAP with 50 members.
She says this indicates that the majority of Financial Advice NZ members who took part in the survey are looking at going into a transitional licensing FAP for themselves.