If it wasn’t already evident, the FMA has made it crystal clear the clock is ticking for financial advisers, writes David Greenslade

The clock is ticking for financial advisers and meeting the required education standards by 15 March 2023 is not negotiable. Make no mistake – the FMA is serious about ensuring advisers and FAPs meet the law.

One of the key points made during a joint FMA and Strategi webinar was that all financial advice providers (FAPs) need an approved documented policy to ensure that all persons providing advice under its licence meet the competence, knowledge and skill requirements of the code.

This would involve having a training policy which at a minimum identifies how advisers will meet the equivalent of the New Zealand Certificate in Financial Services (Level 5) V2 (NZCFS5 V2) and maintain the right level of continuing professional development (CPD).

FAPs will need to have a mechanism in place to track the progress of advisers toward being at the equivalent of the NZCFS5 V2 by 15 March 2023.

From what we know, it can take between eight to 12 months to complete the qualification and that is for the core strand and one specialist strand. The FMA has indicated there will be no time extensions.

The FMA has indicated there will be no time extensions…

The law is the law, and if advisers don’t have the required competency by 15 March 2023, they will have to stop giving advice.

Building the equivalent of Level 5 is more suited to large FAPs and it doesn’t give advisers the qualification.

The code enables FAPs to build the equivalent of Level 5 by demonstrating competence, knowledge and skill via systems, processes, controls and internal training material. The process takes time and requires a FAP to be at a significant size to have the requisite processes in place.

This process is role specific and does not provide the nominated representative or financial adviser with the actual qualification. It is most suited to situations where a narrow range of advice/products is provided.

It is also clear that several specialist strands may be required. If advice is given in multiple areas, e.g., investment plus insurance, then those giving advice will need both the investment strand and the life disability and health specialist strand. Advisers will need to obtain the specialist strand before providing the advice. If this applies to you, then start now with your study.

CPD needs to be holistic, relate to the advice provided and align to changes in the business…

When a FAP purchases a book of clients, it needs to be able to service those clients from day one of the acquisition. A FAP needs to ensure it has enough advisers with the right specialist strands to service those clients. If the specialist strand has not been obtained, then the FAP will need to delay settlement until the specialist strand is obtained.

CPD is critical. The FMA says Code Standard 9 “…is the most critical standard. Moving forward after receiving your qualification, we expect ongoing professional development.”

The FMA is expecting to see an approved and documented process that ensures accurate and full records of each individual’s competency is kept and maintained. CPD needs to be holistic, relate to the advice provided and align to changes in the business, client demographics, new products/services, plus changes in legislation, regulation, the code and regulator guidance.

Finally, it is essential advisers know the products they advise on. Many product providers do a fantastic job with product accreditation. Others provide very little. If you are going to use a product, then you have a duty to upskill yourself to be able to professionally advise on it.

David Greenslade is the Executive Director at Strategi Group  You can contact the firm on 09 414 1300.