Financial adviser deregistrations underway

Almost 10,000 financial service providers are now registered to provide financial advice in New Zealand according to the Companies Office, up by 748 from March 15 this year.

Thursday, July 1st 2021, 6:28AM

by Matthew Martin

However, that number is expected to drop with about 550 financial service providers (FSPs) being sent letters from the Companies Office warning them of imminent deregistration.

Statistics (see below) provided to Good Returns by the Ministry of Business, Innovation & Employment state that as of June 24, 9926 FSPs were registered on the Financial Service Provider Register (FSPR), up from 9168 as of March 15.

Since June 15, 72 FSPs have been deregistered - 37 of those were voluntary deregistrations, 34 failed to provide annual confirmation and one was deregistered for failing to provide approved dispute resolution scheme details.

Ministry of Business, Innovation & Employment business registries national manager Rob Rendle says the Registrar has not deregistered any financial advisers for failure to link themselves to a financial advice provider (FAP) " he first has an obligation to give notice of intention to deregister".

"On 17 and 18 June we gave notice to those FPSs who had not engaged with a FAP by 15 June 2021. About 550 notices had been issued.

"Those FSPs have a 20 working day objection period within which to update their registration.

"Deregistration numbers won’t be known until the 20 working days has passed, and the Registrar has completed deregistration. FSPs will be sent a notice confirming deregistration once it’s completed," Rendle says.

FSPs on the FSPR:

- FSPs registered as financial advisers on the FSPR as at 15/03/20: 9316

- FSPs registered as financial advisers on the FSPR as at 15/03/21: 9178

- FSPs registered as financial advisers on the FSPR as at 24/06/21: 9926

Financial Adviser FSP removals since June 15, 2021:

- Failure to provide annual confirmation: 34

- Statutory Notification (failure to provide approved Dispute Resolution Scheme details): 1

- Voluntary deregistration: 37

Financial consultant and adviser coach Tony Vidler says it's difficult to be sure why there's been such an increase in a short timeframe "...but my guess would be the shift in numbers is due to business restructuring mixed with a bit of double counting".

"Looking back four to six months there were a lot of advisers who believed they would be well served by a dealer group FAP or perhaps a collective structure where they pooled resources with other advisers and formed a single FAP with underlying individual agency ownership.

"In plain English, I believe a lot of advisers are jumping from the ship they were on six months ago to a new ship or launching their own lifeboats.

"But what seems to be clear is that there is a reasonably significant shift to standalone licencing from collective licencing structures and I think that will continue for a while yet.

"This movement is probably resulting in the situation where an adviser four months ago equalled one FSP entry, but that same adviser now equals two FSP entries as they set up their own business structure as well as being registered personally as a financial adviser," Vidler says.

"The surprising factor in these numbers is the relatively insignificant number of removals for failure.

"I expected the stupidity stats to be higher - cue a self-congratulatory round of applause from the industry to itself."

He says the move to provide a notice period before deregistration is an excellent one "...and the Registrar is to be congratulated on that".

"Making haste slowly is an excellent approach on this issue."

Financial Advice New Zealand chief executive Katrina Shanks says the numbers reflect how engaged financial advisers and FAPs are with the new regime.

"There will be a number of advisers who were on the register who are no longer giving regulated financial advice [and] that will be included in those entering the deregistration process."

Shanks says the last hurdle for FAPs is to obtain a full license.

"The financial advice sector is more than ready for the new regime and has embraced the change and are looking forward to focussing on what they do well – providing quality financial advice which increases New Zealanders financial health, wealth and wellbeing."

Tags: FANZ FAP FSPR Katrina Shanks licensing MBIE Tony Vidler

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