The Government has announced that the regime will now not take effect until at least March, giving advisers another nine months to complete their transitional licence application.
David Ireland, a partner at Dentons, said the delay would mean people applying for a financial advice provider (FAP) licence would have time to revisit their plans and make sure all was in order.
“While most will welcome the delay, those who had prepared themselves to go early may need to unwind things.”
He said there were a number of ways that businesses might now feel they had jumped too soon.
“Delaying FSLAA is the right thing to do but there is collateral damage at two or three different levels.”
He said some current RFAs might have decided that the new regime was one regulatory reform too many.
“They might have decided they don’t want to work in the FSLAA world and [will] exit the business, sold their client base because they are getting out, committed to getting out this quarter.
“Now they find actually they could have operated under the old model and have generated income for another nine months. Given what’s happened, having trail commission coming in for nine months would have been quite good as opposed to offloading that now.”
Some advisers might have already “hitched their wagon to a particular provider train,” planning to come under their FAP because of the time pressure, he said, when they might have made a different decision with a bit more breathing room.
Many providers may also have sunk a lot of time and cost into getting systems set up that were intended to meet new requirements but would now have to be adjusted, he said.
Some had designed new platforms and processes, working on the basis that disclosure regulations would look like the drafts circulated – but it was likely that those would change between now and March as the Government had more time to finesse its requirements and consider feedback, he said.
“Organisations were starting to make decisions based on best guesses at the disclosure framework.”
Many had had to adjust their systems or build new ones that could automate some of those requirements and the investment could end up having been wasted, he said.
“Organisations in that position had to be going hell for leather to ensure they were able to comply with the new environment on June 29. They will now not be the best build to support FSLAA when it comes in at the earliest in March next year.
“People who made decisions with the best of intentions could end up with some wasted expenditure and wasted anxiety and effort.”
He said it would be important that people did not lose momentum through this period. Adviser business should not wait until the end of the year to think about progressing their licence applications, he said.
Full licensing will now not take effect until 2023.
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But I don't feel like "collateral damage" though - rather feel like that's one less thing to worry about. And there will be plenty else to worry about for the rest of this year. Kind of relieved that the rest, including Full Licencing (FL) is on a longer time frame.
We have had too much, too fast, for too long.
But it bothers me a bit that I am still very much in the majority. So few licences have been issued that many must be finding this extra time to be a relief. That is very unfortunate - it simply should not be such a relief - this is your livelihood - it should be sorted by now.
I anticipate that, whatever the new date is, it will be a hard date. Expect the FMA will accept zero excuses, extensions, or offer any tolerance for laggards.
And I disagree with Mr Ireland on all three of his points:
1 - Some who have hastened to sell will regret exiting. Good riddance. TL is basically BAU - no CKS until (FL), no big decisions on FAPs and DGs unil FL. Just pay the money and carry on. So be grateful you got out when there were still willing (and capitlised) buyers. If FSLAA was too much, then see ya later aligator.
2 - You may have hitched to the wrong train. Fine - just hop off at the next station. Besides, TL started in November, and Lockdown started at the end of March. You should have known what you were doing, how, and with whom by then. Seriously, if you thought you needed more breathing room, you must be on a waiting list for a ventillator right now.
3 - Providers and DGs have sunk cost into preparing for TL then FL. Good. Then they will be ready for it when it happens. But if complying with FSLAA etc is the only benefit (now with a longer wait for RoI) that you expected, you have done it wrong. You should now have better systems, docs, procedures and probably a better business. Maybe more compliant, resilient, and profitable.
Gee, what a waste.