Our aim is to give you more options, more opportunities, more choice and more control over what you do with your business. Independent Advisers are stronger together as they grow their businesses when navigating the regulatory regime.
Get your own TL! No matter who you intend to work with, or even if you are coming under someone else’s FAP, if that provider closes down for any reason, without your own licence you will be completely dependent on someone else agreeing to take liability for you.
As an insurance policy – and to give you up to two more years to sort out your future in the industry, get your own TL!!
It’s a two step process:
Step 1: Log in to the FSPR and register your intention to apply for a transitional licence.
Step 2: Apply for the licence through the FMA’s website.
Number 3: Get your business or practice ready to operate as a licence holder. A good comprehensive tool is Partners Life Adviser Support Program. This is available free of charge to anyone who has a PPL agency. All other Newpark Members can access the software for $495+GST. The cost of hiring consultants to help you do this will be north of 7K so this is great value.
It will take you roughly 20 hours to complete this “paint by numbers” so devote 4 hours a week for 5 weeks and you will have your business fully documented. The policies and procedures are a legal requirement for all businesses, and having them in place will enhance the value of your business as an asset in the future should you wish to sell.
You can contact your PL BDM or us at enquiries@newpark. co.nz to help you gain access to the program.
Number 4: Make sure your Professional Indemnity cover is up to date and adequate. Newpark has a group discount with AON for this. Your contact is Lee Gornall at firstname.lastname@example.org
Number 5: Make sure you have a disputes resolution provider. Newpark have a group discount with Financial Services Complaints Limited. Contact there is Michael Saywell email@example.com
Number 6: If you’ve completed Number 3 you will have a complaints process and register in place and understand how to use it. If not, contact us at firstname.lastname@example.org and we can help you build one quickly.
Number 7: Record keeping: Make sure you have a means to document all of your advice documents, research, conversations, emails, applications, and service arrangements with your clients that is easily accessed. If you are not already using a CRM, contact us to discuss Toolbox which is available free to use from Newpark. email@example.com
Number 8: Review your advice process to ensure it is fit for purpose and allows you to fulfil your duties and obligations under the new act. If you have questions contact us at firstname.lastname@example.org, look on our website www.newpark.nz for more information.
Our ASSET team can undertake a 2-day review of all your documentation and CRM processes to ensure they are up to date and compliant. Or we can put you in front of Compliance Refinery who will do a full business and advice Health Check for you at special Newpark discounts, depending on the size of your business and the number of Advisers that have to be reviewed.
BEFORE you move straight to applying for your transitional licence you will need your RealMe login handy, then ensure you have registered for a Financial Service Provider number for both your business and yourself as an Financial Adviser under your business.
The business which will hold the FAP must first declare an intention to obtain a licence by going on the FSP register and making changes. The process is:
Log in, search for and select your FSP:
On the ‘FSP details’ screen, from the ‘My Tools’ dropdown select ‘Change request to FSP (Individual or Entity)’.
Click on the ‘Financial Services’ tab.
The new Financial Advice Service is listed at the bottom of the financial services list. Once you’ve chosen your relevant licence, select ‘Proceed’.
For individuals, you’ll see the service ‘Licensed Provider – Transitional licence’.
Entities have the option of selecting the services ‘Licensed Provider – Transitional licence’ and/or ‘Authorised Body – Transitional licence’.
Update any other details that have changed.
Return to the ‘Review’ page, confirm that you have read the disqualification declaration and select ‘Continue’. The status of your declaration changes to ‘Confirmed’.
Select ‘Continue’ to save your changes.
Pay any relevant fees.
This process is very quick but once done, requires a 24 hour turnaround time by the FSPR before you can successfully submit a transitional licence application.
1. If you are a ‘managing agency’ with employed advisers then from the 28 November you need to do this:
Your managing agency has a unique FSP Number. Each Adviser, including the managing director if they give advice, must also have an FSP number. You can hold two FSP numbers – one as the managing agency and one as the Adviser. The only entity applying for licence is the managing agency. If you have more than one FSP number (an individual and business FSP for example), it’s important you enter the FSP number that will hold the licence.
2. If you are a managing agency with contracted self-employed advisers then from the 28 November you need to do this:
As above, and those Advisers would be Authorised Bodies to be named under your licence, with description of how they provide advice. An authorised body is an entity named on your licence that can provide the licensed service without needing their own licence. All authorised bodies named on your licence must register on the Financial Service Providers Register as a financial advice provider. You, and the authorised body, are responsible for the authorised body’s conduct, advice and actions, and ensuring they meet all market services licensee obligations. Answering yes to this question will trigger questions about the authorised body you would like to name on your licence. The authorised body can only provide regulated financial advice to retail clients on your behalf if you have an existing agreement in place allowing them to do this.
3. If you are a sole trader then from the 28 November you need to do this:If an adviser is carrying on as an individual and not corporatizing, they will become a licenced FAP, not an FA. But the challenge is that the liability under the regime falls to them at the individual level. My advice would be that they create a formal business entity, a limited liability company where the liability is contained. This allows the Adviser to protect personal assets from any claim.
As part of the application process for a transitional licence, the FMA will ask you to provide some details about your business, such as the types of services and products you will provide advice about, and who will be providing advice under your licence. The FMA will consider whether:
Your directors and senior managers are fit and proper for their roles
There is any reason to believe you may not meet your obligations
You will be registered on the FSPR.
Transitional licensing only provides the FMA with a better sense of who is operating in the market enabling them to anticipate the number of full licence applications and resources needed for ongoing monitoring and supervision
Code standard 6 specifies that the standard of general competence, knowledge, and skill is the New Zealand Certificate in Financial Services (Level 5) version 2 approved by the New Zealand Qualifications Authority in January 2019. The general qualification outcomes are qualification outcomes 1-4 of that certificate. New to industry Advisers must have this qualification before providing Advice. Existing Advisers have a two year safe-harbour period to get the qualification.
An important thing to understand is that the FAP licencee you join assumes all the risk for your advice. So they will want to manage that risk by taking on Advisers who they can rely on to minimize or eliminate that risk. If you are not Level 5 or don’t use a CRM system, for instance, they may be concerned about your advice and processes, which is where breaches that are costly can be made.
An example of what recruiting criteria a reasonable FAP would apply to limit their risk could look like this:
• Level 5 certified
• Minimum 3 years tenure in financial services
• Fit and proper
• Evidence of PI cover at appropriate levels
• Evidence of DRS membership
• Evidence there are no outstanding complaints with FMA or DRS
• Disclosure of any previous complaints or penalties
• Credit Check
• Police Check
• File audits – minimum 3 randomly selected and redacted
• Provision of CV and professional associations
• Disclosure of conflicts
• Three character references
It is also likely that you will be charged a fee or commission split to the Licence holder who will have to not only carry your risk, but ensure they either employ or contract a Compliance and Risk team to provide the ongoing governance requirements like attending observational meetings with clients and auditing your files on a regular basis, investing in the business structures and policies that are required to be built and maintained as an FAP licencee .
Yes, the Code of Professional Conduct for Financial Advice Services was prepared in accordance with Part 4 of Schedule 5 of the Financial Markets Conduct Act 2013.
Subpart 5A of Part 6 of the FMC Act imposes statutory duties on persons who give regulated financial advice to retail clients:
– to comply with the standards of ethical behaviour, conduct, and client care required by the Code
– to meet the standards of competence, knowledge, and skill (including any continuing professional development requirements) provided in the Code for giving the advice.
The Code comes into effect on 29 June 2020.
In addition to asking for about any criminal convictions relating to you as the applicant, you can also expect the FMA to investigate your solvency as part of a fit and proper person test. For entities the FMA will ask for details about:
– criminal convictions relating to your senior managers or directors
– regulatory action relating to you or your authorised bodies.
As a business entity you will need to demonstrate that your business is solvent, and that the financial management is free from conflict – that is, it is operated quite separately to your personal bank accounts and is managed in a manner that eliminates the perception of any conflict, i.e. you may not want to pay for the kindergarten fee from the business account when that is a household expense. Keep an eye on what goes through your accounts.
Code standard 9 specifies that you must, at least annually, plan for and progressively complete learning activities designed to ensure that you maintain:
– the competence, knowledge, and skill for the financial advice you give
– to the extent relevant to the financial advice you give, an up-to-date understanding of the regulatory framework for financial advice in New Zealand.
– entities must, at least annually, review their procedures, systems and expertise to ensure that they maintain the capabilities for the financial advice they give.
Note that there is no minimum number of hours required to keep up your CPD. The development you undergo, however, must be relevant to each area of financial advice that you provide. Furthermore, it is the responsibility of the Adviser to keep a record of their training and attendances and not the supplier company or development provider.
FMA licensing for FAPs will be proportionate to the business size. The FMA will not expect a 1-3 person business to have the same high level of documented policies, procedures and systems in place as a large multi-adviser operation.
– It costs $405 (ex GST) to apply for a transitional licence.
– Full licence application fee (payable to the FMA) is $767 (ex GST).
– Annual FMA levy (payable to the Companies Office at FSPR annual confirmation) $225 (ex GST) for the financial advice provider plus $265 for each financial adviser.
– FSPR annual confirmation fee (payable to the Companies Office) $75 (ex GST) for the financial advice provider plus $75 for each financial adviser.
– Initial FSPR registration fee (payable to the Companies Office) $300 (ex GST) plus $460 levy (ex GST) if registering a new entity on the Financial Service Providers Register.
The responsibility to provide evidence there are appropriate skills and processes in place rests with the FAP owner. In practice this means contracting an external auditor on a regular basis to certify that the business is compliant. The FMA can also visit your operation for a monitoring check.
The biggest change under the Licencing regime is that clients will no longer be dealing with an individual for financial advice, they will be dealing with a business. And all businesses are required by law to have certain governance in place to protect their clientele. Even if you work from home, where you may have staff or clients meet with you, you will need to demonstrate a documented awareness of their safety and measures to minimize or eliminate risk. Do you have a dog? What risk does that pose to your client/staff and how will you manage that risk? Write it down.
With the exception of retail banks, supplier companies can be expected to stipulate that they have a direct contractual relationship with an Adviser business as a FAP. This should be relatively straightforward to accomplish, and is especially significant where the FAP provides advice on different multiple lines of product.
On the date that licencing begins, the concept of Class Advice ceases to exist. Most RFA’s have been able to sell KS by relying on the Class Advice option as only AFA’s are able to offer any personalized investment advice. You must sell investment products on the basis of Personalized Advice, and for that you must have your Kiwisaver Strand completed in Level 5.
You can build a business with a realisable asset value that can be sold without any encumbrances to a purchaser of your choice. Presenting a potential purchaser with a ‘turn- key’ opportunity to purchase an entire business operation will drive a higher premium when it comes time for you to exit the business.