Transitional licensing 'a hurdle for small businesses'

Forthcoming limits on new entrants to the industry are predicted to hit small advice firms hardest.

Friday, June 21st 2019, 9:00AM

Transitional licensing will start later this year, ahead of the regime coming into force in June next year.

The code of conduct for all advisers will take effect at that point.

Those who have been operating as an RFA, AFA or QFE under the existing regime will start with a transitional license, and then have two years to apply for a full license.

Existing advisers will have a competency safe harbour that gives them time to meet the qualification standards required of the code of conduct for financial advisers – that is, that they have capabilities equivalent to the outcomes of the level five certificate.

But new advisers will not have that safe harbour.

A spokesman for the Ministry of Business, Innovation and Employment, said anyone who wanted to hire an adviser who was new to the industry could employ them in a non-client-facing role while they trained and got up to standard.

“To help ensure that consumers can access financial advice that is of a high quality, the new regime introduces a universal duty of competence that applies to anyone who gives financial advice to retail clients.”

Adviser Murray Weatherston said it was a potential problem for smaller firms who wanted to grow through that transition period.

Big companies would still be able to take people on and set them up as nominated representatives. “It’s another part of the regime that’s in favour of the big end of town.”

Compliance specialist Barry Read said the existing recruitment processes of QFEs would probably be able to continue, while other advice firms could not.

Some might choose to put new recruits through a stage of training, shadowing another adviser, or presenting advice prepared by another adviser until they were qualified. Others might make a qualification a condition of employment.

“We are only talking about certificate-level training its not like you’ve got to wait a year or two to get a degree.”

Weatherston said anyone who thought they might want to become an adviser should register now as an RFA so they could automatically transition.

Tags: Financial Services Legislation Amendment Bill qualifications