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Transitional licence not a free ride

Transitional licensing will give adviser businesses time to work out how they want to approach the new regime, but no one should expect it to be an easy ride, Financial Advice NZ says.

Friday, July 26th 2019, 6:00AM 1 Comment

by Susan Edmunds

The Financial Markets Authority revealed on Wednesday that transitional licence applications will open on November 4 and will be accepted through until the new regime starts in June next year.

Advisers who do not have a transitional licence by next June will need to work under another FAP licence or wait until they received a full licence.

FMA director of market engagement John Botica said it should be a straightforward process. He said advisers could apply for a transitional licence to enable their business to continue operating, and then make a decision later on about whether they wanted to continue to a full licence.

But Katrina Shanks, chief executive of Financial Advice NZ, said advisers should be aware that a transitional licence still came with obligations.

Once the licence was granted, the advice business would immediately have to comply with nine duties (see below), she said.

Transitional licensing would also include a record-keeping and complaints process standard for all advice businesses.

She said, even though a transitional licence seemed easy to obtain, advisers would need to ensure their businesses had the compliance in place to meet the conditions of the licence. “They need to be compliant on day one of the licence being granted.”

But she said many advisers were still waiting to see what the rest of the industry would do and which groups and providers would opt for a full FAP licence.

Until that became clearer, it would be hard for advisers to definitively determine their path forward and transitional licensing was a way to allow for business to continue through that period. “Transitional licensing is a fantastic opportunity to ensure you can still give financial advice.”

THE DUTIES

  • Ensure your clients understand the nature and scope of the advice you’re providing
  • Give priority to your client’s interests where there’s a conflict of interest
  • Exercise care, diligence and skill at all times
  • Comply with the new code of professional conduct for financial advice
  • Only recommend financial products that comply with the FMC Act
  • Ensure you follow the new disclosure regulations and make sure your client understands the information they    are given – we expect draft disclosure regulations to be released for consultation soon
  • Comply with any licence conditions we may include when granting your licence as well as those set in law
  • Make sure all financial advisers providing advice on your behalf comply with duties 1 to 7
  • Tell the FMA if you materially contravene your obligations or make significant changes to your business

Tags: Financial Advice New Zealand Financial Services Legislation Amendment Bill John Botica Katrina Shanks licensing

« Here's how licensing will workMann on a mission to diversify financial advice »

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Comments from our readers

On 26 July 2019 at 9:24 am Barry Read said:
Once the licence was granted, the advice business would immediately have to comply with nine duties (see below), she said.

Not quite. According to the FMA guidance and timeline, all licences will come into affect on the 20th of June 2020. They may be granted between November 2019 and June 2020.

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