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[The Wrap] A crystal ball look at the new world of advice

Everyone is asking what's going to happen to advisers now the new regime has been passed and everyone is going to have to change their business model. Here's my take on this rather thorny question.

Friday, April 12th 2019, 5:44PM

The clock is now ticking for advisers to ready their businesses for the new post-Financial Advisers Act era. The question I'm regularly asked is: What's going to happen?

The fact that I'm asked so often indicates that nobody really knows.

Perhaps the ones most in the dark and worried are the Financial Markets Authority. No one knows how many FAPs it will have to monitor, nor the resources required to do this work.

One certainty is that it will need more money and resources when licensing really kicks in. (But how much will the Government cough up?)

A discussion I had recently was that the FMA may be making a rod for its own back by saying interim licensing will be easy and affordable. That, coupled with New Zealand advisers' preference to run small independent businesses, encourages more firms to take up their own licences rather than band together into bigger and, arguably, more economic groups.

Interim licensing is a tick box, online exercise where you'd expect pretty much everyone on the FSPR will get through....there will be one or two exceptions, though.

What the FMA has said, but not particularly loudly, is that when full licensing kicks in the requirements will be much tougher and it is likely the bar will continuously be raised.

My guess is that there will be a large number of advisers who elect to be FAPs, but that will change over time. The catalyst for change will be the FMA and its peers who have the levers to make it harder and harder to remain a FAP, thus forcing consolidation by regulatory pressure.

On the other side of the equation there are a couple of trends. Some firms have seen the light and joined together. My two case studies are Mortgage Supply/NZMA and Astute Financial Services. Exhibit Two is Milestone and Kepler.

When I go out and about and talk to people there are a couple of observations worth noting. Nearly every time I go to an investment event I meet someone I have known for years who has hung up, or is hanging up their shingle. I predict we will lose many highly experienced investment advisers.

When it comes to life insurance, it seems people think licensing will be a breeze. How wrong that is. The mortgage advice space is different altogether because of the way it is structured. One question I pondered this week is will the advent of FAPs mean the days of some of these dealer/aggregation groups are numbered?

I suspect it will be harder for them, and the groups which rely on override commissions from life insurance companies face some existential questions.

And when it comes to the advice process then I'd say advisers in general insurance are going to be the most challenged in the new regime.

Tags: FSLAB

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Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
ANZ 5.79 4.45 4.49 4.69
ANZ Special - 3.95 3.99 4.19
ASB Bank 5.80 4.49 4.49 4.45
ASB Bank Special - 4.09 3.99 3.95
BNZ - Mortgage One 6.50 - - -
BNZ - Rapid Repay 5.95 - - -
BNZ - Special - 4.05 3.99 3.95
BNZ - Std, FlyBuys 5.90 4.69 4.59 4.79
BNZ - TotalMoney 5.90 - - -
Credit Union Auckland 6.70 - - -
Credit Union Baywide 6.15 5.20 5.25 -
Lender Flt 1yr 2yr 3yr
Credit Union North 6.45 - - -
Credit Union South 6.45 - - -
Finance Direct - - - -
First Credit Union 5.85 - - -
Heartland 6.70 7.00 7.25 7.85
Heartland Bank - Online - - - -
Heretaunga Building Society 5.75 4.70 4.85 -
Housing NZ Corp 5.80 4.69 4.79 4.79
HSBC Premier 5.89 3.99 3.99 4.39
HSBC Premier LVR > 80% - - - -
HSBC Special - 3.69 3.69 3.95
Lender Flt 1yr 2yr 3yr
ICBC 5.79 3.99 3.99 4.49
Kiwibank 5.80 4.80 4.94 4.84
Kiwibank - Capped - - - -
Kiwibank - Offset 5.80 - - -
Kiwibank Special - 4.05 3.99 4.09
Liberty 5.69 - - -
Napier Building Society - - - -
Nelson Building Society 6.10 5.10 5.45 -
Resimac 5.30 4.86 4.46 4.69
RESIMAC Special - - - -
SBS Bank 5.89 4.85 5.05 5.49
Lender Flt 1yr 2yr 3yr
SBS Bank Special - 4.05 3.99 4.49
Sovereign 5.90 4.49 4.49 4.45
Sovereign Special - 4.09 3.99 3.95
The Co-operative Bank - Owner Occ 5.75 3.99 4.15 4.35
The Co-operative Bank - Standard 5.75 4.49 4.65 4.85
TSB Bank 5.80 4.55 4.49 4.65
TSB Special - 4.05 3.99 4.15
Wairarapa Building Society 5.70 4.85 4.99 -
Westpac 5.95 4.69 4.79 5.19
Westpac - Offset 5.95 - - -
Westpac Special - 4.05 3.99 3.95
Median 5.89 4.49 4.49 4.47

Last updated: 17 April 2019 8:49am

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