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Qualifications focus 'upside down'

Advisers who’ve focused on getting a level five qualification to enable them to transition to the new advice regime may have taken the wrong approach, an adviser coach says.

Thursday, July 4th 2019, 6:00AM 10 Comments

Transitional licensing starts at the end of this year, and the new regime officially takes hold next June.

But adviser coach Tony Vidler said some advisers had been focusing on the wrong aspect as they prepared for it.

A new code of conduct will require level five-equivalent adviser competence for anyone who was not an AFA under the current rules.

But Vidler said, because there was a safe harbour of two years before advisers must meet the competence standard, many should have put their energy into honing their business processes, not scrambling to get qualifications.

The Financial Markets Authority has indicated that as part of transitional licensing, advice businesses will need to show immediately that they have good record-keeping and complaint management processes.

“A lot of advisers have thrown all their money, time and energy at the wrong aspect of getting through licensing.”

But Katrina Shanks, chief executive of Financial Advice NZ, said advisers should take an even further step back when considering their approach.

Advisers needed to understand where they would sit in the new licensing world, she said, because each step in the decision-making process would have implications on the next.

People would need to decide whether they wanted their own financial advice provider license, she said, and if so what liability they wanted to take – whether they were willing to take responsibility for any other advisers and staff or not.

The type of staff in the FAP would also affect what decisions needed to be made, she said, because qualified advisers would need fewer processes and controls than those who needed systems to backfill their qualifications.

"How do you want to operate in the future? How do you see the growth of your business, what does that look like? Is it that I take the liability in my own FAP or I grow my business inside someone else’s FAP. Lots of business decisions need to be made before even start considering regulatory decisions.”

She said all current RFAs would have record-keeping processes “to varying degrees”.

“I don’t think licensing is the problem.

“The transitional period allows financial advisers who have not decided a pathway to full licencing to have time to make the many decisions which are required. There are many advisers who are still uncertain as to which FAP they will belong and with time the FAP world will become clearer.”

Tags: licensing qualifications

« Reserve Bank capital requirements 'could prompt listing'Advisers ask: Should we have to pay for licensing help? »

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Comments from our readers

On 4 July 2019 at 6:39 am Murray Weatherston said:
Timescale is actually much shorter

First an aside. What an interesting world! Or should that be self interested.
* Qualification providers encouraging RFAs to enrol early and get on with Level 5.
* A business coach saying - no no you're concentrating on the wrong things - consult me.

But that is not the real point of this contribution.
I know that would-be "financial advisers" (statutory definition) providing regulated advice to retail clients DO NOT have the 2 year transition period to decide what FAP they will belong to.

When FMCA financial advice provider licensing goes live sometime in June 2020 (11 months away), anyone who wants to be a financial adviser will have to be linked to a FAP as at that date.
Now I agree that a financial adviser may change which FAP they provide advice for at any later time.
But come say 1 June 2020 to be safe (the minister has said some date in June) each AFA/RFA will have to belong to (at least one) FAP in order to stay in business.
i.e. the timescale for decision making on this issue is much shorter than the article suggests.
Since it would be cutting it very fine to leave that decision to D-day advisers actual first FAP decision will have to be made I guess sometime in the 1st quarter of 2020. After all I seriously doubt that every current RFA adviser will seemlessly fit into a FAP on day 1 of that relationship.
On 4 July 2019 at 10:06 am Tash said:
I agree, get ready as soon as possible for licencing. Partners Life have an excellent program that creates all the business policies and processes the FMA is likley to require. Simple, flexible, convenient and easy.
On 4 July 2019 at 11:36 am John Milner said:
Good points Murray. And it is not a given that you will be accepted by your preferred FAP going forward. There may be advisers out there with no home to go to with a murky history. For some I would not take this for granted.
On 4 July 2019 at 12:56 pm all hat, no cattle said:
Indeed re the comments above.
How many current advisers will find themselves the profession's equivalent of the fictional Lieutenant Philip Nolan.
On 4 July 2019 at 1:19 pm Murray Weatherston said:
Just remember to use the terms precisely.

It is only FAPs who will be licensed.

If you "just" want to be a financial adviser, your decision is "which FAP" do you want to provide advice on behalf of.

And then of course John Milner's very salient point arises - "will the FAP you desire to be part of actually accept you?"

PS In case you think I've missed something out, I always exclude consideration of nominated reps as I think most of them will simply be salespeople for the BEOT.
On 4 July 2019 at 2:42 pm Barry Read said:
And if any of that is confusing and you are looking for some clarity, you could always join tomorrows webinar to get the facts about FAPing....


https://www.goodreturns.co.nz/diary/nz-adviser-licencing-decison-pathway-webinar-4021.html
On 4 July 2019 at 3:15 pm Tony Vidler said:
reasonably minor point of clarification Murray:

I didn't ask anyone to consult me. Nice shot though.

As is the way of these things there was a conversation lasting quite a few minutes which has been abridged (not criticising Good Returns on that basis either, it is just the way jopuirnalism works). I made similar points to those of Katrina in this article, amongst which was that there are higher priority issues for many advisers in the short term than attaining NCFS5 in my view.

I do agree with your point regarding the timeline too...there is nowhere near as much time for many advisers as they believe, as their business model choice will determine requirements and timeline - and the need to make that choice is looming large rapidly.

we are on the same page here I think you'll find.
On 4 July 2019 at 3:25 pm Frustrated Adviser said:
OMGoodness it seems to be the same pattern as 2010/11 that everyone else is making money from these changes apart from advisers - it should not be that difficult or confusing that we need to pay another party to attend a webinar should it?
So far educational,audit, webinars etc make $$ and we pay more and more $$$.
Perhaps a heads up to the Regulators to make sure it is crystal clear so we don't have to pay out unnecessary $$
On 5 July 2019 at 11:31 am John Milner said:
Unfortunately Frustrated Adviser there are still many advisers who have little idea of what will be required of them moving forward. I have personally found plenty of resources to guide me to date, including that of the FMA.

The writing has been on the wall for a very long time in regards to the minimum education standard (level 5) with Australia's RG146 in place for some time now. However, we still have hundreds if not thousands of advisers yet to start level 5.

I suspect many if not all advisers yet to start their study have an expectation of being regarded as a professional but sadly don't want to invest in themselves as a professional would.
On 6 July 2019 at 7:51 am Adviser1 said:
The penny will drop for some advisers when they do level 5 - so best to tackle it earlier rather than later. Can't see the point leaving it. You're either fully in or fully out of this new regime IMHO.

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