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900 advisers expected to leave the industry

The Ministry of Business, Innovation and Employment predicts around 900 advisers will exit the industry when the new financial advisers laws come into effect.

Monday, June 24th 2019, 10:10AM 4 Comments

The ministry has laid out its predictions for the industry once the Financial Services Legislation Amendment Act takes effect.

In a cost recovery impact statement released as part of its update on licensing requirements, the ministry said there were currently around 9,000 Authorised Financial Advisers and Registered Financial Advisers.

It said 90% of the current AFA and RFA force would become financial advisers, meaning around 900 would leave the industry. Twenty-three per cent would become a financial advice provider (FAP) as a sole-adviser business.

As well, 50% of non-QFEs that currently engage one or more AFA or RFA will become FAPs.

Under the new regime anyone who gives financial advice to retail clients will be required to operate under a licence granted by the Financial Markets Authority (FMA).

Application fees for these licences will range from $612 for single-adviser businesses to $922 for a business with nominated representatives for a full licence. There will also be an option for the FMA to charge an hourly rate if there was a particularly complex application.

A flat fee of $405 will apply for a transitional licence. 

There are currently about 1995 AFAs and 7100 RFAs, or a total of just over 9000, MBIE said.

MBIE says there are another 21,500 people work within a QFE.

All current QFEs are expected to become FAPs.

Under the new regime, it expects there to be 2296 licensed financial advice providers, 8186 financial advisers and 21,500 nominated representatives.

It expects 2170 applications from sole-adviser businesses or FAPs only giving advice on their own account.

MBIE said the full licensing process would be robust.

“The FMA will be required to consider a wider range of factors, including whether an applicant is capable of effectively providing financial advice services.

"In addition, the application process will vary depending on the business model adopted by the applicant. For example, the Amendment Act introduces additional requirements on financial advice providers that engage financial advisers or nominated representatives, so those firms will need to go through additional assessment during the licensing process. While the process will be more robust than that used during transitional licensing, applicants will still use a streamlined licensing system, leading to an efficient process and relatively low estimated average processing times."

MBIE said the model of a flat application fee and hourly rate wold be most cost-effective for the FMA. If the hourly rate was not an option, the flat fee would have to be higher.

The FMA receives an annual appropriation of $36 million, the majority of which is funded through a levy charged to financial service providers.

MBIE said all financial service providers would continue to pay $460 plus GST on initial registration under the new regime.

Financial advisers would be levied independently.

Its preferred option is then to introduce a base annual levy for FAPs with an additional amount for every nominated representative, or when the FAP gave advice on its own accord.

That would start at $225 a year then $137 per nominated representative, or $737 if the FAP gave its own advice.

Advisers would pay $265.

 

 

Tags: licensing MoBIE

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Comments from our readers

On 24 June 2019 at 12:54 pm Winka said:
Oh Crikey,
Over compliance continues to go over the top to obviously create jobs for a newish government department, plus, more to the point, a body who is funded predominantly by the very people who may choose to find and prosecute the comparatively very small proportion of members who deserve to be banished.
Financial Advisers should/could use their skills to try and calculate the acceptability of a government organisation who is "given" such a huge amount of $36 million (plus on-going annual subs) and see if they can justify how it is spent?
Not unlike the farcical $30 million of our money spent on a 'go nowhere' unnecessary flag referendum?

Our local bus service is another comparable example of wasted government use of money.98 buses @ $400,000 each = ~$40 million PLUS they get $14 million subsidy per year whether or not they get any patrons.

Another eg; is the number of new scaffold companies erecting scaffold and then wrapping the building in white plastic "because central government directed local government (councils) to apply over the top compliance to buildings that are probably mainly ok...and have proven themselves with time.

It has been reported that between 63% to 67%+ of all building work has been attributed to such scaffold & white plastic covered 'work?'
What happens when all the 'compliance' finishes....I see it all not as logical work, more as unsustainable DEBT?
Do we then see the inevitable 'slump?'

Is all this merely to create the impression that we have a booming economy?

It has been often said that we are suffering an era of "conditioning".
We can only blame ourselves then can't we....for letting such 'conditioning take over.

Or remain as 'Lemmings?'

Don't get me started on climate change!
On 24 June 2019 at 6:01 pm JPHale said:
I would suggest this is a rather light assessment.

Taking the QFE's where banks make up a good portion of the placement of people, the removal of sales incentives is going to drive a greater exit from this space than may be intended, particularly in the area of life insurance products.

Given the Financial Adviser exit stats published by ASIC suggesting a 6% drop in adviser numbers in Australia in 5 months, there's going to be an impact here too once the reality of the changes sink in.

Many older advisers have expressed their intention to exit as they don't see the point in re-training for just another few years either.

Then there's the little challenge of those that have done Level 5 FA, that need to go back and do their advice strand paper, or those that have done core and advice strand that need to go and do the financial advice strand backfill.

Yes, there is 2 1/2 years to tidy up the education bit, but many are already saying it's too hard...

If it is 10% of the current AFA's and RFA's, first cut, probably not far off, however, if this translates to the QFE numbers then we're talking more like 3,500...
On 24 June 2019 at 9:05 pm I was wondering said:
Be interesting to see how accurate they are. How did they come up with the 900 figure?
On 26 June 2019 at 11:11 am Doggy said:
I just hope this doesn't become a self-fulfilling prophecy.

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