GUEST COLUMNIST – DAVID WHYTE
David Whyte, Managing Director of DCW Management, writes that early adopters of the incoming regulatory regime will find it substantially less of a challenge when it arrives.
The decision to defer the introductions of the Financial Services Legislation Amendment Act until March 2021 has provided many advisers with some wiggle room.
The advice from all sources has essentially been: “If you’re unsure if you want to operate under your own or somebody else’s license and/or haven’t decided on which course you are likely to take, apply for a transitional license meantime”.
This is pretty sound advice as we have enough information to answer the key question: “Do I want to be a nominated representative retained by a product provider or a financial adviser in charge of my own destiny?”
If the former, the decision is easy – go find a vertically integrated organisation and become a product salesperson acting on behalf of that organisation. If the latter, the decision is between operating under your own license or somebody else’s.
And here it gets more complicated because we’re not entirely sure what the real cost of retaining a license is likely to be. Estimates vary, but upward of $5000 a year seems to be a baseline. Indirect costs – the time an adviser spends meeting license obligations, and therefore not generating revenue – could push this to nearer $10,000 a year.
…balancing operational activity with strategic implementation is an investment that will pay dividends…
At some point, the economics of license retention will discourage some and encourage others to follow the ‘own license’ option. These will be individual decisions driven by preference, objectives, and finances.
But for those who are contemplating a long-term strategy of securing their own license, the path toward obtaining and retaining a license should be pursued soonest. Why is this appropriate? Because the adoption of new, compliant, and unaccustomed processes, procedures, and practices takes time, effort, and resource.
New ways of doing things are not necessarily intuitive and the constant attention to embedding compliance into every action, activity, and management conversation can be challenging.
It takes time for new practices to become habitual and pervasive, so the longer advisers and their support staff have to develop comprehensive best practice processes and procedures the better. And the sooner we get started on these initiatives, the easier the path to full licensing will be.
Same applies to the education journey. The term ‘journey’ is deliberate as education is not a finite concept that ends with obtaining a certificate. Apart from the formal CPD requirements, learning is, and should be, a continual process.
This learning is not confined to the technical aspects of risk, investment, and lending – the three specialist strands in the Level 5 qualification – but licensees are required to run businesses, not just sales units or practices.
The more skill, competence, and knowledge licensed businesses can apply, the more effective will be their delivery to consumers…
The more skill, competence, and knowledge licensed businesses can apply, the more effective will be their delivery to consumers, the better will be the experience of staff and all other stakeholders.
Learning about organisation and management, governance, leadership, behavioural finance/economics and many other business-related subjects will have a direct and beneficial impact on advisers, their clients, and their businesses.
Technical product knowledge can be accessed from product providers, but business knowledge has to be sourced elsewhere – Governance NZ, or NZ Institute of Directors, for example.
The early adopters of a learning culture will have time to socialize and internalize new ways of conducting their businesses and find the new regulatory environment substantially less of a challenge when it arrives.
There are certainly current and pressing matters of client wellbeing around the Covid-19 situation, but balancing operational activity with strategic implementation is an investment that will pay dividends.
As many have already experienced, despite the seemingly endless round of submissions, consultations, papers etc, time has a habit of running away on us. And to defer or delay implementation of an agreed strategy runs the risk of the unexpected occurring and derailing intentions. So the message is to make the commitment, get cracking, and don’t hold off progressing matters.
I can’t help but think of the Robert Burns poem “To A Mouse”. It was inspired by the Bard accidentally ploughing up a mouse’s nest, which the mouse needed to keep safe through the winter months. The recommendation is to avoid being that mouse. Get with the timetable and don’t let your best laid schemes ‘gang agley’.