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[The Wrap] What future financial advice firms could look like

Sorting out what the financial advice industry is going to look like under the new regime is something akin to trying to solve the Rubick cube.

Friday, May 24th 2019, 6:14PM

For the past two weeks, since Commerce Minister Kris Faafoi approved the new Code of Conduct for financial advisers, it’s been the most talked about topic.

It’s been interesting to see all the discussions going on amongst advisers and providers about what it means. (The answer is no-one really knows)

This week I have been at the Mortgage and Insurance Link conference. Bankers were quite open that they were all grappling with how the new landscape will look.

One view circulating was that a mortgage adviser could form their own FAP and then get accredited with banks, rather than having to go through an aggregation groups as they currently do.

It’s absolutely clear banks don’t want a proliferation of bodies and this idea won’t be allowed to flourish.

Then there is the idea group’s will become FAPs but there could be FAPs within that FAP.

This is possible, but the question is which one takes responsibility for advice given?

THE THREE BEARS OF ADVICE

My guess is there is going to be an optimal size for a successful FAP. It’s a little like the three bears.

Some will be too small to be viable and some will be too big and those in the middle will be just right.

If you think advisers will be able to decide what their future looks like, you are mistaken.

It looks more and more likely that the product providers, such as banks and life insurance companies, will have a significant impact on the future shape of the advice world.

So too will the regulators. They have neither the resources nor the wherewithal to be overseeing hundreds of FAPs.

While the Financial Markets Authority have said it will be cheap and easy to get a transitional licence, that won’t last.

When it comes to full licensing the barriers to entry will be significantly higher; so too will the costs.

Advisers who think getting a transitional license then sitting back is all they have to do are, quite frankly, deluded.

MortgageLink have produced a little video that should be a sobering reminder to advisers that being a FAP will be an onerous, costly and time consuming process.

People with their own FAPs could end up finding themselves bogged down in compliance and spending less of their time actually giving advice.

That wasn’t the aim of the Financial Services Legislation Amendment Act, but it will be one of the outcomes.

Tags: Opinion

« SFO raids office of Dunedin AFAAdviser group rebrands and plans to be a FAP »

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ANZ 5.69 4.35 4.35 4.55
ANZ Special - 3.85 3.85 4.05
ASB Bank 5.70 4.29 4.35 4.55
ASB Bank Special - 3.89 3.85 4.05
BNZ - Classic - 3.85 ▼3.79 4.05
BNZ - Mortgage One 6.40 - - -
BNZ - Rapid Repay 5.85 - - -
BNZ - Std, FlyBuys 5.80 4.69 4.59 4.79
BNZ - TotalMoney 5.80 - - -
Credit Union Auckland 5.95 - - -
Credit Union Baywide 6.15 4.95 4.95 -
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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 - - - -
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Housing NZ Corp 5.80 4.69 4.49 4.45
HSBC Premier 5.89 3.79 3.79 3.89
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
Lender Flt 1yr 2yr 3yr
ICBC 5.65 3.85 3.95 3.89
Kiwibank 5.80 4.60 4.60 4.74
Kiwibank - Capped - - - -
Kiwibank - Offset 5.65 - - -
Kiwibank Special - 3.85 3.85 3.99
Liberty 5.69 - - -
Napier Building Society - - - -
Nelson Building Society 6.10 ▼4.69 ▼4.79 -
Resimac 5.30 4.86 4.14 4.19
RESIMAC Special - - - -
SBS Bank 5.79 4.85 5.05 5.49
Lender Flt 1yr 2yr 3yr
SBS Bank Special - 3.85 3.85 3.99
Sovereign 5.80 4.29 4.35 4.55
Sovereign Special - 3.89 3.85 4.05
The Co-operative Bank - Owner Occ 5.65 3.89 3.89 4.05
The Co-operative Bank - Standard 5.65 4.39 4.39 4.55
TSB Bank 5.69 4.45 4.35 4.55
TSB Special - 3.95 3.85 4.05
Wairarapa Building Society 5.70 4.85 4.99 -
Westpac 5.79 4.69 4.79 5.19
Westpac - Offset 5.79 - - -
Westpac Special - 3.85 3.85 4.05
Median 5.80 4.35 4.35 4.19

Last updated: 22 July 2019 9:19am

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