[The Wrap] Many advisers putting their businesses at risk
Apparently the reasonably small number of financial advisers who have applied for a transitional licence isn't a problem. I beg to differ.
Saturday, March 7th 2020, 1:06PM 
5 Comments
The Financial Markets Authority is probably rubbing its hands in glee that the potential "population", as they call it, of Financial Advice Providers (FAP) is looking much smaller than some earlier estimates.
If the number is relatively small then the FMA has a much better chance of being able to regulate and monitor the sector.
From the numerous discussions I have had around the place many organisations haven't yet applied, but intend to. Indeed I have been surprised at how many are still to lodge their application.
It's not hard to do. One firm, which has a DIMS licence and an MIS licence, says it's very easy and just a tick box exercise.
With less than 60 working days until the June 29 deadline there is bound to be a bottle neck. What's more the deadline cannot be extended. Any adviser without a licence will not be able to give advice after the deadline. Russell Hutchinson summed things up well on Moneyblog.
In an admirably blunt statement of the need to get moving Fidelity Life has told advisers that they need to get a transitional licence or they won't be working with them. That was from an email on March 4. They are not alone. Several insurers are now recommending advisers apply for their transitional licence no later than mid-April. I think that’s good advice. So you now have a maximum of five weeks to apply.
It is somewhat bewildering that some advisers are prepared to put their livelihood at risk by leaving their application to the last minute.
Comments are still being made that people don't know enough and aren't sure what to do. That's not really an excuse considering the vast amounts of information which have been pumped into the adviser market. It is also surprising that some groups are still working on their proposition. It was good to see that NZ Financial Services Group, which is the largest group in the market with more than 1000 advisers released its package last week which will no doubt help advisers make a decision. But time is short.
The package and pricing is likely to appeal to the majority of its members, but to get them all on board by June is a mighty challenge.
Another of the big groups is Newpark with 450 advisers. Its mortgage arm has applied for a licence, but not its broking arm. If it doesn't have a licence by June 29 there are a lot of advisers who better get onto applying.
These are just two examples of what's happening in the market.
Surprisingly I have come across few people who have definitely said they won't be applying for a transitional licence. One who has said no is Murray Weatherston. "I will be withdrawing from providing financial advice to retail clients," he told me. He may will hand in his AFA too.
While Murray is voluntarily going down this route, others may join him unless they get their act together pronto.
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As I've advised many people "no man on his death bed ever said that "I wished I had spent more time at the office"" - [the only exception maybe was the actuary who had both a wife and a mistress so that each would think he was with the other when he really was at work.]
I am meeting far too many advisers who say they are just leaving things up to their employer or aggregator and have very little knowledge or interest in the process.
If I was in that situation I would certainly want to know the process and assurance my employer or aggregator was onto things.
I would also be asking as a future Financial Adviser or Nominated Representative for written confirmation that I will be accepted under their FAP now as some will not. Waiting for the invite after 29 June could be too late for some.
Yes if the FMA only has a small amount of FAP licenses to deal with its certainly less work for them but surely that’s not the intention of regulation, regulation is their to protect the consumer, how can having a small handful of FAP licenses operate by large Australian owned dealer groups be beneficial to the NZ consumer ? doesn’t this defeat the whole purpose of regulating the industry ?
The interesting thing today is how are advisers going to deal with this immovable date and the current crisis of Covid-19?
Financial services in NZ have a disaster brewing that is potentially going to be catastrophic come 1 July.
If you haven't got this underway and you are still under the delusion that a FAP is going to look after you, you're going to be toast.
With the announcement of the funding changes by Partners Life, likely to be echoed by other insurers, means that even if you want your dealer group to be your FAP, you may not have the option, as they may not have the revenue numbers to justify running one.
Especially so if the FAP is full of low producing advisers with high compliance needs, the commercial reality of the situation means the dealer group won't have the revenue to operate.
Though there is the flip side of this, the dealer group charging fees of advisers is likely going to be more lucrative for this end of the market than it has been in the past.
Either way, it's akin to pile a spool of unravelled fishing line sitting at your feet with no other way to catch fish. One I'm going to avoid.
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Our strategy has always been to wait and see if there are any learnings from this first application before making the second. We are aware of the 60 day indication - but there are 113 calendar days between today and 29 June, which is way over 60 business days (despite what the article suggests). At the end of March there will still be well over 60 business days until D-Day.
Can I unequivocally state that rumours of the "death" of Newpark in recent days are completely wrong whatever you may have heard.