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Traffic builds on the road to full licensing

Adviser traffic on the road to full licencing has built up to a steady flow as individuals and companies look to the future with the Financial Markets Authority so far approving 80 applications.

Tuesday, September 21st 2021, 12:00AM 8 Comments

by Matthew Martin

The Financial Markets Authority's (FMA) director of market engagement and acting director of regulation John Botica says he's pleased with the numbers so far but after just six months under the new regime it would be hard to identify any trends.

As of yesterday morning, a total of 80 Financial Advice Provider (FAP) licences had been approved by the FMA across all three licence classes with another 19 in progress (see chart below).

"But what I'm impressed with is when we have been getting out and talking to advisers across the country is that a lot of them are thinking about what their business will look like in the future."

Botica says roughly 60% of applications are for Class 2 licences for businesses with between two and 10 advisers whereas in March about 50% of transitional licences were for single adviser businesses.

"They are looking forward at their structures, some may be retiring and succession planning and some may be looking at buying another advice business in future."

Botica says the initial fear of the new advice regime is fading and "...the more questions we get asked helps us to refine our material and application process".

"The first hurdle may have been the fear of the unknown but the application process is straightforward, but you do need to prepare and get your ducks in a row.

"I think there's a much better understanding of the process among advisers now."

Botica says what has been consistent is the total number of advisers in the market and "...we know there were some advisers who applied for a FAP but are now authorised bodies, so some of the numbers are slowly moving around as advisers think of their business structures.

He says turnaround times for applications can change depending on information received and the number of applications at one time, but some have been processed within a few weeks.

"We have set a standard of 60 working days for each one, but we are coming in a lot faster than that right now."

He says the FMA's website is packed with information for advisers who can also park an application once it's been started to complete at a later date.

The FMA can't access partial applications and will only act once a full application has been received.

The FMA's principal consultant for market engagement Derek Grantham says the FMA is working with advisers and firms to make sure they understand the process and what type of license they should be applying for.

"It also means reflecting on what you have learnt over the past six months, and what you think the future will look like for your business.

"One of the first big decisions you need to make is which type of FAP full licence is right for you, as this determines some of the things you need to think about now, and have in place, in support of your full licence application," Grantham says.

For more information about what licence class to apply for, click here.

Tags: FAP FMA FSLAA John Botica

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Comments from our readers

On 21 September 2021 at 10:17 am Matron said:
Six months in and 80 out of 1,796 operating licenses now have a full FAP licence. There has been plenty of commentary on the wider issue of Advisers remaining in the business but based on this stat, there should be a big red flag fluttering at FMA HQ.
On 21 September 2021 at 10:38 am Dirty Harry said:
At 15 April there were 23 months remaining. 1716 / 23 is 75 per month.
5 of those 23 months are gone, and we have a lot less than 375 in. So if they are running less than a third of that average, they absolutely should be lightning fast.
We're now at 1609 over 18 months - almost 90 per month. How long until the average needed to get everyone through exceeds the FMA's processing capacity - and that 60 days thing is out the window?

Yes, I know not all of those transitionals will go to full, but there will be a ton of ABs (which are hard to predict/count) - and if we're 3 for 117 so far, does that mean ABs are harder to get through?
On 21 September 2021 at 10:40 am JPHale said:
@Matron I'm sure that the FMA is looking at it going we're going to have a problem.

I'm not surprised, most advisers are still digesting what's going on and they will leave it to the last minute like they always do.

Then there are the ones where the trans was either cover before retiring or they have found a home and aren't going to use it.
On 21 September 2021 at 3:38 pm Tony Vidler said:
It is certainly a slow take up rate, but it wouldn't seem that the slow application rate lies at the feet of the FMA, and nor does there appear to be an issue with processing times at this point. So perhaps the elements slowing down the licencing process are little to do with the regulator.

As has been observed before by myself and others, there is a significant state of flux in distribution land and still many hundreds of advisers "on the move" between groups/FAP options and figuring out their final licencing position - and that IS a significant factor amongst the smaller (Class 1 or Class 2) potential licencees.

I find it intriguing that the larger and far more complex business applications amount to a grand total of 4. There is no shortage of large companies who must themselves be applying for full FAP status at some point who appear very willing to tell advisers how they should conduct themselves and I wonder where they are in the process?

That is merely an interesting aside though; the bigger issue I see which is having an impact upon the number of Transitional Licence holders applying for full licence is simply the mish-mash of messages and confusion being created by commercial organisations with vested interests who are on occasions downright misleading with the information they put into the market.

Lots of Transitional Licence holders are utterly confused in other words. They are not confused about how to be good advisers or run good businesses, but they are increasingly confused about what they have to do in order to obtain a licence because of the constant barrage of vested interests giving them conflicting information.

Perhaps more rapid progress would be made if a few service providers would cease and desist with doomsday-selling tactics for a start, and a few more large companies got their own house in order before telling distribution their versions of the truth.

For any advisers out there who are utterly confused by it all, just read the FMA Guide To Full Licence Requirements. It is actually very clear and very helpful. And maybe stop listening to outfits trying to sell you something or control what business you do.
On 21 September 2021 at 7:19 pm Amused said:
@Tony Vidler Well said. Well said indeed.
On 22 September 2021 at 8:41 am Jeromac said:
The regulation makes the sole adviser role somewhat spurious. I understand over 50% of transitional licences were from sole advisers. To complete a full licence application I have to provide a business continuation plan which means that I have to form a realatio nship with another adviser and form an agreement for that adviser to act as a locum with my clients. My mortgage clients are rang by their bank frequently and I guess there would be an interesting discussion about who owns the clients. However it is quite clear from the FMA's point of view that I own the clients. If I ask my electrician for his business continuation plan it is likely he will refer me to the electricians section of the yellow pages. It will be interesting to see developments between now and 15 March 2023.
On 22 September 2021 at 9:43 am valkyrie6 said:
Yes and the other issue is the training outfits, they continually tell you need to review this and review that, do this course do that course, each review /course costs no short of $ 2,000 a pop, you can hit 20k in training fees with them and still not have a FAP licence, this is all on top of running a business ,going through regulation, getting dictated to and stiff armed by header groups, processing ongoing bank policy lending changes , Covid , Nuts, the FMA has no idea what advisers are going through right now,
On 22 September 2021 at 12:24 pm Dirty Harry said:
@ val
the FMA has no idea what advisers are going through right now,

sooooo :

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