New Zealand’s financial advice industry has successfully transitioned to a new regulatory regime with FAP licences becoming mandatory a year ago. This article explores the journey so far and what’s next for advisers.
On March 15, 2021, the Financial Advice Provider (FAP) regime was introduced, requiring advisers providing financial advice to retail clients to hold a licence. This ensured a single standard across the industry.
What followed was a two-year transition period, wherein FAPs were allowed to operate under a transitional licence.
On March 16, 2023, a significant milestone was reached in the industry with transitional licences expiring and the requirement for financial advice providers to have in place a full licence was enforced.
Alternatively, advisers could be an authorised body under another financial advice provider licence.
“At this point, advisers had done the work getting their licence in place but now it was time to run a compliant business in line with their declared policies and processes, and with good governance and oversight,” said Ryan Edwards (pictured above), managing director at The Adviser Platform (TAP).
Edwards said TAP has been supporting advisers throughout this period, helping them adapt to the new regulations.
“We see the transition to licensing as an invaluable opportunity for advisers to refine their operations and enhance the advice they give to their clients,” Edwards said.
“Those advisers that have made the most of the opportunity and put in the work, embraced the change and capitalised on the services available to them are those who will succeed.”
The adoption proved effective, with the Financial Markets Authority (FMA) CEO Samantha Barrass calling it “the most successful transition” she has seen in her career.
“Good governance is good business. TAP is supporting advisers who have the aspirational goal of running strong advice practices that have discipline, efficiency and oversight,” Edwards said.
“This increases the businesses value, and also means formal regulatory obligations are easily met.”
While the industry should be congratulated for the smooth transition, another crucial milestone is fast approaching.
The end of the first regulatory returns period is on July 1 with the return due by Sept. 30 and Edwards said advisers must ensure they get their governance in order.
Advisers are obligated to provide the FMA with an annual regulatory return, which include information on the nature, size and complexity of their service, the level of skill or training of the adviser, and the types of financial products they offer.
Failure to meet this obligation would be a breach of the third standard condition of holding a FAP license, according to Edwards.
“Advisers will waste a lot of time and energy tracking down and reporting on figures that they really should already have on hand,” he said. “Good record-keeping is at the core of running a valuable, successful business.”
“Advisers should be able to give an honest assessment of their systems and their ability to produce this sort of good governance reporting.”
While Edwards said it was difficult to quantify how many advisers might struggle, based on conversations with non-TAP members, many advisers are struggling to provide the information required based on their current reporting arrangements.
“Many advisers may feel like they are doing a good job day to day; however, reporting on the work they are doing with the detail and oversight that good governance requires will be challenging and stressful for large parts of the market.”
Fortunately, for advisers equipped with the right tools and support, navigating the requirements of the first FAP returns should be straightforward, according to Edwards.
“TAP’s system can produce these at the drop of a hat,” he said.
However, for those who find themselves unprepared, Edward warned that the road ahead would be daunting.
“Advisers concerned about the upcoming returns are encouraged not to delay seeking support. The time to act is now,” he said. “Engaging with the TAP team can set your business on the right path, ensuring that you meet regulatory requirements with confidence and continue to provide exceptional service to your clients.
“As the industry stands on the brink of another significant milestone, TAP remains committed to empowering our members to give more clients better advice. Through our services, support and training, TAP members are well-positioned to navigate the complexities of the regulatory landscape, now and in the future.”
