"The hurdles are higher, and the standards are higher"
Advisers have been provided with a range of target dates for their full license applications, which the FMA said should help facilitate a “smooth transition” from transitional licensing, and avoid a flurry of last minute applications.
Class 1 and Class 2 financial advisers have been given a target date of September 30, 2022, to submit their applications, while Class 3 applicants have been told to get their applications in earlier by June 20, 2022.
Director of market engagement John Botica noted that the FMA had seen a significant number of last-minute applications at the transitional licensing stage in March, and was hoping that a set timeline would help advisers submit their applications in good time.
As of October 18, 1,706 financial advice providers were still operating under transitional licenses. Botica highlighted that all transitional Financial Advice Provider (FAP) licenses will expire on March 16, 2023, so it will be vital for advisers to ensure that they have their full license processed and approved by that date.
“With transitional licensing, 18% of those applying for a transitional licence left it until the last fortnight before the deadline closed,” Botica said.
“That just won’t be an option with full licensing. We thought it important to be clear about that well ahead of time.”
“We recognise that advice businesses are currently facing demands on many fronts and managing competing priorities,” he added.
“By setting clear application target dates, we hope to signpost sensible timeframes for transitional licence holders to aim for and achieve.”
The FMA regularly liaises with the Financial Services Council (FSC) to help advisers be fully prepared for all regulatory changes, and FSC CEO Richard Klipin said that the timeline will be a helpful guide for advisers who are looking to start the full licensing process.
He acknowledged that the transition into the new regime has not been easy for the sector, but said that the ultimate goal was a system of quality, easily accessible financial advice - something which has never been more important in light of the COVID-19 pandemic.
“It is a new regime, and the point of it is that the hurdles are higher, and the standards required are higher,” Klipin said.
“That’s been the objective from the get-go, so there is a higher mountain to climb in terms of professional change.”
“A lot of it is around people getting their mindset clear around what this is designed to do, and that is to give better quality advice delivered to more New Zealanders, in a way that’s in their best interests every time,” he explained.
“That is the challenge, and so right now, the main pain point is around getting the thinking right and the mindset right. There is a documentation process around applying for licenses and making sure that you have all of the requirements in place, and there are plenty of people that are there for support.”
Commenting on sector preparedness, Klipin said that the latest Delta outbreak and prolonged Auckland lockdown had certainly had an impact, with many advisers once again facing the challenge of running their businesses completely remotely. However, he said that organisations such as the FSC would be looking to support them no matter what stage of the process they’re at, and encouraged advisers who are concerned about the full licensing stage to get in touch for assistance.
“COVID-19 is the backdrop for all of this change at the moment, so readiness has really depended on where the advisers have been based,” Klipin said.
“For those who have been stuck inside of the Auckland boundary, running a business on a sustainable basis has brought challenges when it comes to managing teams, managing clients, and in making sure that you’re looking after everyone. Then of course, against that backdrop, they have to deal with significant regulatory change.”
“In the advice market, it’s fair to say that there are a number of ‘early adopters’ who are really getting on with it, and who can see the opportunity that they have with licensing,” he explained.
“But as a community, we’re obviously looking to support all types of advisers irrespective of where they are in the pipeline.
“The role of an adviser and the value that they deliver to their clients is really important, particularly in the COVID-19 pandemic. So, making sure that they can transition effectively and quickly into the new regime is something we’re all very focused on.”