Financial Advice Regulatory Regime - Now In Full Effect

The Financial Markets Authority (FMA) - Te Mana Tātai Hokohoko - is marking the final major milestone in the new financial advice regime: the end of the transitional licensing phase. With full licensing now in effect, this will continue to give Kiwis greater confidence in consistent standards across the financial advice industry.

From March 17, all financial advice providers (FAPs) must hold or operate under a full licence from the FMA if they want to provide regulated financial advice to retail clients.

This follows a two-year transition period, since 15 March 2021, during which they were allowed to operate under a transitional licence.

Those requirements, brought in by the Financial Services Legislation Amendment Act (FSLAA), also include adherence to the Code of Professional Conduct for Financial Advice Services and its standards of ethical behaviour and competence, knowledge and skill. All advisers must be part of an approved disputes resolution scheme, that clients can use for free in the event of any problems.

FMA Director of Deposit Taking, Insurance and Advice, Michael Hewes, says it’s taken a lot of people a lot of work to get ready for the new regime in the four years since FSLAA was passed in 2019.

“We want to acknowledge the considerable efforts of the thousands of New Zealanders who work in the financial advice industry, as well as those who represent them at professional adviser bodies, and our public sector partners at MBIE, the Companies Office, and the Code Committee,” says Mr Hewes.

“We’ve been impressed at how many advisers have recognised the opportunity and willingly done the mahi to meet the new requirements. Collectively, these efforts have further strengthened the sector as a whole.”

Mr Hewes says the transitional period has been a success, with over 2,500 Financial Advice Providers either directly licensed or operating as an Authorised Body, as at 17 March 2023 – a number that includes licences issued to sole operators as well as small firms and large entities employing multiple advisers.

“The total number of advisers covered by those full licences will be known in June, once their details have been linked to each licence-holders’ registration on the Financial Service Providers Register.”

The value of quality financial advice is particularly relevant in the current environment, when many New Zealanders are navigating challenging financial decisions.

“The new regime is designed to give people greater confidence to go and get professional advice while making important financial decisions – like planning for retirement or getting the best mortgage structure or insurance policies – and greater confidence in whatever advice they receive.”

Mr Hewes said: “Our focus on advice will now turn to monitoring and supervising the licensed advice providers, having finalised the questions for regulatory returns that licensees must file every year, the first due in September 2024.

DATA:

· Class 1 licences are for sole adviser businesses

· Class 2 licences are for businesses that engage more than one adviser

· Class 3 licences are for large organisations that engage nominated representatives among their staff.

· An Authorised Body is an entity (eg company or partnership) named on a Financial Advice Provider licence

Licensed Finance Advice Providers - 1,360

Class 1 - 451

Class 2 - 855

Class 3 - 54

Authorised Bodies - 1,140

Advisers on Financial Services Providers Register - 8,838 (who will be linked to FAP licences on the FSPR by June 2023)

Nominated representatives associated with Class 3 FAP licence - 11,957

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