FMA wants advisers to apply for DIMS licences

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The FMA’s new guidance note on DIMS has been designed to make it easier for advisers to offer these services to clients.

Thursday, June 19th 2014, 6:00AM 4 Comments

by Philip Macalister

FMA Senior Adviser, Compliance Colin Magee acknowledges that the earlier consultation paper on DIMS was seen as benefitting larger firms and potentially driving independent financial advisers into corporate firms or out of the industry totally.

The new guidelines released yesterday are designed to be flexible and to allow IFAs to operate in this space, FMA director of compliance Elaine Campbell says.

“This space is not reserved for the big end of town,” she told goodreturns.co.nz.

“We don’t want an outcome where people capable of providing this business don’t do it because of some concern around licensing criteria.”

Magee says under the new guidelines “more small businesses may apply than might have been expected.”

Under the guidelines there are two types of DIMS. One is a licence issued under the Financial Markets Conducts Act (FMC) which is for class DIMS. The other option is that an AFA can seek authorisation under the Financial Advises Act (FAA) to offer personalised DIMS.

Applications will be treated under one process however FMA has added some flexibility authorise personal DIMS, based on its view of the applicant’s risk profile.

All applications will be subject to an “objective statutory test,” she says.

Campbell says the FMA’s view is that most AFAs who currently provide DIMS services to clients are doing so under a class advice model, mainly because they are using model portfolios for their clients.

Magee says under the new guidelines it may actually be easier for an AFA to get a DIMS licence under the Financial Markets Conduct Act, as opposed to the Financial Advisers Act.

He says because an AFA is using model portfolios it may be “a less complex service.”

It appears that an AFA with only an FAA personalised DIMS authorisation would be unable to use model portfolios, even if it was the correct investment strategy for the client. This is because the use of model portfolios is considered class DIMS.

Although the FMA has good knowledge of the AFA community through its engagement with the sector and monitoring programme the number of AFAs who had the skills and ability to design bespoke investment strategies was an “unknown quantum”, Campbell said.

She said the FMA was trying to apply the law in a “right-sized way.”

“We think IFAs are important,” she says. “Access to advice is one of the ways we can restore confidence in the market.”

AFAs who currently are authorised to provide DIMS services under their FSPR registration will lose that authorisation once the new regulations come into effect.

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