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Advisers ask: Should we have to pay for licensing help?

The Financial Markets Authority says it will help advisers understand how licensing works – but if they want to know what is the best path for them to take, they may need to pay for professional advice.

Monday, July 8th 2019, 6:00AM 2 Comments

Advisers on Good Returns have questioned why paid webinars and seminars should be needed to guide them through the process of transitioning to the new regime.

"It seems to be the pattern as 2010/11 that everyone 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,” one said.

Gavin Austin, owner of compliance firm ABC, said he agreed.

“I’m happy to take a call from anyone who wants to talk about it, I’m not going to charge anything.”

He said the transition to the new regime was an opportunity for compliance firms to add value because they could talk to advisers about what was happening, with a view to selling services if appropriate.

A spokeswoman for the FMA said the regulator was happy to answer questions about the changes and had been proactively talking to advisers for many months.

They could email, call or set up a free 45-minute session in person or on the phone, she said.

"Our website includes a lot of information about the changes and we also send out regular updates via email to all advisers registered on the FSPR.

"While we’re happy to talk through the changes, our role is not to advise firms or individuals on what’s best for them – they may well want to seek professional advice on this."

David Greenslade, of Strategi, who is running licensing seminars at present, said the FMA would provide a comprehensive licensing guide.

“However, it is prudent that a transitionally licensed FAP seek advice relating to the application and policies/processes etc so that they are ensuring their licence application is fit for purpose and proportional for their business. 

“A licence application is effectively an undertaking to the regulator as to how a business intends to operate and how it will meet its obligations and FMA expectations. It is important that an application is not ‘under cooked’.

"This is where the applicant provides too little information to enable FMA to make an informed decision or too little in the way of policies and procedures to provide confidence to the FMA  that the business can meet its obligations. Conversely, an application does not want to be ‘overcooked’. This is where the applicant over engineers its policies and procedures thereby creating an unrealistically complex structure under which it operates.”

He said getting advice would benefit the business y providing ideas on how to streamline processes.

“Ideally, a FAP should avoid going down the track of taking current systems and processes and just adding additional compliance on top. It is normally better for the business and the client to use entry into the new regime to re-engineer a number of systems and processes to increase efficiencies, improve the client experience, reduce costs and ensure compliance.”

Tags: licensing

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Comments from our readers

On 9 July 2019 at 7:33 am MPT Heretic said:
Hopefully in the comprehensive licencing guide the FMA can clearly articulate the difference in cost and civil liability of a sole trader becoming a FAP and a FA, or alternatively becoming a FAP and providing advice on your own account.
On 13 July 2019 at 12:36 pm Tony Vidler said:
The short answer to the question in the headline is "no".

One may as well ask however "should a defendant have to pay for a lawyer when they go to court?". The answer to that question would be "no" as well. Factually, they do not. That is not necesarily a smart move for most defendants however.

In a similar vein, Advisers intending to obtain their own licence don't "have" to pay for external help. They can spend the time working it out themselves of course. After all, that is what those who are offering advice have done, so there is no reason why any other intelligent person who understands the advice business and the law and international best practice standards and trends can not do the same thing.

However, time is against many practitioners in developing that knowledge set. The timeframe for some serious development of systems and processes is short, and the degree of internal development work is high for many practitioners if we are to be blunt about it. So the choice essentially is save cash by figuring it all out yourself, or spend a nominal amount (which will be far less then the downtime of DIY for most advisers) and get fast-tracked in systems and process development from those who have invested considerable time and effort in figuring it out and developing processes.

I expect that the regulator will continue to give good guidance in any number of areas, but we must acknowledge that there is still a fair bit of the actual interpretation and implementation that they must leave open for the market to figure out given we have a principles-based regime which is deliberately structured to enable industry to innovate and personalise to a significant degree. It is that aspect which I most admire of the proposed regime, but that does present the short term challenge of ensuring that a multitude of systems and processes deployed across a large range of business models meet the regulatory objectives. One can't expect the regulator to provide specific guidance on every facet of the industry that covers all possibilities for all market participants - if they did the industry would be howling about how much guidance was being given and we'd be hearing accusations of Big Brother...I have some sympathy for the FMA at the moment as I think they do have a difficult brief in a very tight timeframe.

Advisers should remember that if they want specific guidance (or acceptance/approval by the regulator) they can obtain it. That is in fact the point of the licencing application process itself. Put in an application for a FAP licence (when the process is open for it) and you will find out whether your own business' systems meet the regulators approval.

In the meantime we are left with what is deemed to be inadequate regulatory guidance by many (who also incidentally usually also expect the maximum level of autonomy in their business affairs and as such tend to favour light-handed regulatory involvement), leading to relatively high levels of uncertaintyin the market.

Which brings us back to the choices for guidance. The choices are simple: figure out for yourself whether you are achieving the regulatory objectives with your busines systems and processes, or seek counsel from those who can provide some strong guidance as to what is most probably going to be an aceptable standard for your unique business.

Make a business choice that makes sense for you and your practice. For some there is no doubt that external guidance would add nothing of any particular value. For some market participants, there is no doubt that any amount of external help still won't get them to the point where they should get a licence. The vast majority however lie between the 2 extremes and must decide for themselves what is the appropriate balance of investing either their time or their money into being prepared to stay in business and retain their business value.

For those that choose to invest money rather than time, the the consultants and experts will often make commercial sense. It is that simple at the end of the day.

On the subject (finally) of whether one should pay anyone for anything (which is the essence of this story perhaps advisers need to consider it in light of the very challenges thrown up in the conflicted remuneration debates which have raged. Haven't we seen enough dialogue yet covering the "if you aren't paying for it then you are the product" topic?

There is a line I have used quite a lot when discussing fees and costs over the years with consumers and advisers which seems appropriate here: "whoever is paying the person giving advice is who they work for. If you are not paying them then they are not working for you, they are working for someone else".

The central question for advisers might then be: "do I want some expertise in my corner developing my business the way I want, or do I want my business developed and pushed in the direction that other people want?"

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