Trading up from a transitional licence to a full FAP licence will help advisers identify any regulatory issues in their business, writes Derek Grantham, Principal Consultant, Market Engagement at the FMA.
“When staff, time and resources are stretched, it can be tempting to prioritise work in your business over work on your business,” says Grantham in an FMA blog post.
“And yet how your financial advice business is on the inside, very much affects how you are on the outside.”
He says advisory business owners need to consider:
- Are you organised for success?
- Are you focused on clients and what’s important to them?
- And even if you had the time, where would you start?
Grantham says full licensing is an opportunity to perform a business health check and identify areas of the business that need attention.
“Recent events have shown that the risk of cyber-attacks in New Zealand are very real – is your business equipped to deal with that? If not, how long are you prepared to go without putting some protection in place?” writes Grantham.
“Instead of thinking about whether you have time to apply for a full licence, a more useful question might be: ‘Am I prepared for a cyber-attack?’ If not, how long are you prepared to live with that risk?
He says the same goes for the other FAP full licence conditions and obligations such as:
- The key business risks around properly managing client complaints
- Disruptive events
- Keeping appropriate records
“The process of applying for a full licence gives you a reason to consider them, and to put in place a framework to manage them,” says Grantham.
“In other words, the process of applying for a FAP full licence is an opportunity to check your advice business is set up for success.”
Grantham says the regulator is not asking business owners to be 100% perfect.
“What is required is a demonstration that you’ve thought about the risk and taken meaningful steps to address it, in a way that makes sense for your business,” he says.
Transitional licence holders need to have a full license by 16 March 2023 to continue providing financial advice.
Download the FMA’s Full Licence Application Kit and the Standard Conditions.