[The Wrap] Into the unknown
We're days out from transitional licensing opening and still there are questions which remain unanswered.
Sunday, November 24th 2019, 11:19AM 
10 Comments
It's taken what seems like forever, to get to the start of transitional licensing for financial advisers. Despite having all this time to prepare many advisers still seem unsure about what route to take.
There is an expectation that there will be thousands of FAPs once transitional licensing closes next year. However, there are signs this maybe changing. At the TMM Better Business Conference for mortgage advisers the number of people who said they would set up their own FAP was very low. As were the number of undecided people.
In talking to people around the advice industry there appears to be a bit of a sea change taking place as advisers get to grips with the additional costs and compliance that will be imposed on any business which is a FAP.
I'm guessing the number of FAPs will be fewer than what has been predicted. This, no doubt, will be music to the FMA's ears as it does not have the capacity or resources to manage thousands of FAPs.
THE UNKNOWNS
There are still many unknowns which may shape what businesses look like in the future.
Unknowns include the disclosure rules and what the Government will do around conduct and culture.
For mortgage advisers only two of the big banks, ANZ and BNZ, have come out and declared what their position will be with regards to FAPs and who they will work with.
In the life insurance space I'm not sure any of the providers have stated their position regarding FAPs and accreditation. Let alone what they will do with regards to remuneration.
Override commissions, which many of the groups lived off have gone. No doubt that pot of money will still be spent on distribution, but how is going to be something to watch closely.
It is good to get rid of overrides as the money in the past hadn't been used as the life companies intended. Any money spent this way should be to help advisers improve their practices and raise the level of professionalism.
And of course there is the vexed question of how much it will cost to either be a FAP or belong to one. Numbers like $21,000 a year have been suggested by one mortgage group, while an investment group CEO suggested to me that the cost will be considerably higher. That would be no surprise as the risk and potential liabilities around wealth management are arguably much higher than home loans.
There is likely to be a race to the bottom on price – we see it in some sectors now.
To wrap things up there was a comment this week that the FMA has been too soft on licensing, giving the impression it will be easy, inexpensive and not too onerous. That may be true for transitional licensing, but it will be a different picture when full licensing kicks in and costs like auditing, compliance, CRMs and professional indemnity insurance become clearer.
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Comments from our readers
I know at Newpark we have spent bundles on things like
Paying for Level 5 tuition fees for members
Free in-house CRM
Free business development support
Free regional development days - maybe that should be renamed CPD?
Conferences.
Arrangement of PI Scheme
If those things don't raise the professionalism of advisers, pray tell what else you think we should be doing?
The law does not prevent it, but FMA has the power not to allow it when they consider individual FAP licences.
Last time I asked FMA (4-6 weeks ago), I was told MBIE was developing a paper on the subject.
They started the FAA review at the end of 2014, and its a bit disconcerting to find that 5 years later, on the eve of the new regime going into it's soft open, they haven't figured out such basic things.
Also it's hard to understand why the disclosure regulations took so long to appear before they too have to go live - they are so late that at least one law firm is arguing in their submissions that the implementation for them should be delayed to give firms time to amend their IT when the final form has been decided.
Furthermore it is factually incorrect as the previous two commenters point out. While it’s fair to say that the focus for business development has shifted recently to licensing and compliance support from the dealer groups, the investment of time, resources and funds by Newpark in this regard is massive and is only going to increase.
Additionally, Newpark have clearly stated their position and offering moving forward. We are committed to supporting our advisers to retain control over their own businesses by offering best of breed tools to become and remain self-licensed.
Suppliers are kidding themselves if they think Advisers will dance to their particular tune and become tied agents if dealer groups are cut of the mix. They can't expect to get off the hook that easy.
And while there has been significant negatives over the years, particularly with the money grab aspect of the overrides, it's not always been the case with every group.
Having been an insurer BDM, Newpark BDM, and now an adviser with Newpark, the one thing that has been consistent with good advisers associated with Newpark has been the value added to their businesses. It has been consistent.
As a BDM my guys with Newpark always spoke well of the group, the support and help they received was appreciated. I can't say the same about the rest that were around in this time.
As a BDM with Newpark, around the time Partners Life kicked off, there was a push to ensure that the new insurer was supported and it had its moments of interesting press, but too it was still all about driving value and growing adviser businesses.
As an adviser, the ongoing support and services from the team has been invaluable. The level 5 training the Newpark has done, isn't just a one off, they actively did it in 2009/2010 and again with the latest changes coming.
There are a lot of positives from a good dealer group, and they are evolving. Newpark’s changes to adapt to the new regime have been great to see, the team and resources now available mean as an adviser business I have a deeper level of access than I may have had in the past.
Sure the overrides have been problematic, but the one consistent thing with Newpark is they have used them for adviser and distribution development, unlike some that have used them to somewhat bribe producers to join, or have been an outright money grab. It doesn't mean the money provided wasn't needed, it does say the method of distribution may be flawed.
Unfortunately as with everything the poorer behaviour drives the change.
As we move into the new regime the position of dealer groups is evolving, There is a place for them along side the professional bodies, they have different functions.
The provider advocation in more recent times is evidence of this. FANZ is playing more in the regulator advocation space, while dealer groups are more focused on operational issues, which the overrides do drive.
The stance from Newpark on licensing and provider structures means that we do have better clarity on what this looks like. As too their stance with BNZ has driven a change of approach by BNZ.
I'm looking forward to the new regime kicking in, as strange as that might sound, as too I'm looking forward to the continued relationship with Newpark with this. Because independent advice businesses like mine need services support that doesn't come with handcuffs.
Not to forget that a good part of being with a group is the interaction and association with industry peers. Something Newpark has always had a focus on. Life advice is a tough industry, that can be isolated, being able to share experiences and ideas in a more social way is valuable to all in the industry.
And not forgetting the Tall Guy in a Tie, the recent focus on Mental Health within the industry is a welcome and very positive initiative that is needed.
Dealer groups may not be considered relevant in the new regulated advice process, they probably shouldn't be part of it anyway.
Dealer groups have an important part to play in providing services to support adviser businesses under the new regime. And this is the step change needed.
Dealer groups that feel the need to FAP members potentially don't have their clarity of value proposition clear, and FAPing is their way to protect themselves. Which I have said plenty about elsewhere here.
The success of our industry depends on adviser independence and that means being FAPs in our own right. This is where Newparks focus is, a successful advice industry.
The above comment could not be further from the truth if it tried.
As a member of Newpark I have received FREE CRM, FREE level 5 accreditation, FREE adviser development days held 2 monthly, FREE IT support, FREE lead generation, FREE business development advice, FREE assistance with FAP licencing requirements, the arrangement of PI insurance and subsidised conferences that always have excellent key note speakers that have provided excellent advise and tips that have added immense value to me, my business and in turn my clients through the knowledge I have gained. Without Newpark's help, I know I would be sunk. Without dealer groups providing adviser support, like Newpark, who is going to do it?
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