Financial advisers working with multiple Financial Advice Providers will be placed under a high level of scrutiny by the Financial Markets Authority.
A document released by the Ministry of Business, Innovation & Employment says that while it is possible for a financial adviser to be engaged by more than one financial advice provider, “…there is a risk that these ‘multiple provider arrangements’ could lead to consumer confusion or harm.”
A spokesperson for the FMA says: “Those considering this should think carefully about their duties in the Act, the regulations, and code needed to be satisfied by the FAPs and aspects of reputational damage and liability if anything goes wrong.
“A financial adviser does not need to be engaged by different financial advice providers in order to give advice about different types of products or different product providers’ products,” said the spokesperson.
During the transitional period, the FMA will monitor how many advisers opt to work for multiple FAPs…
The MBIE document lists a number of questions for providers considering this arrangement, including:
- How will clients understand who is responsible for the advice, and what to do in the event of a complaint?
- Will the firm be exposed to any potential liability or reputational damage arising from the actions of a financial adviser also engaged by another financial advice provider?
During the transitional period, the FMA says it will monitor how many advisers opt to work for multiple FAPs and the behaviour of advisers operating under multiple provider arrangements.
“If concerns arise from these types of arrangements, the new regime allows for MBIE or the FMA to prohibit FAPs from engaging a financial adviser who is also engaged by another FAP,” says an FMA spokesperson.
FAPs will be able to see what other FAPs advisers are working with via the Financial Service Providers Register.
Transitional licence
Some financial advisers are concerned that people obtaining a transitional licence won’t automatically be granted a full licence. So, what might prevent them obtaining a full license? It’s too early to say, according to the FMA.
“This work is not yet complete so we’re unable to comment,” says an FMA spokesperson. “We will be sharing more details on full licensing in the coming months.”