Adviser consultancy firms say full licensing provisions bring mandate for change

The full licence provisions bring certainty and a mandate for change, say adviser consultancy firms, Compliance Refinery and Strategi Group.

Tuesday, November 10th 2020, 6:52AM

by Daniel Smith

Steve Burgess

Compliance advisory firms are working hard to help bring advisers up to the standards set by the full licensing provisions released by the FMA last week. Good Returns spoke to representatives of two leading compliance consultancy firms to see what issues were most pressing for advisers looking to meet the standards of the new regime.

Steve Burgess from Compliance Refinery said the biggest thing that the full licence conditions offer advisers is certainty. “A large part of the industry has been slow to progress primarily because they have been saying ‘we don't know everything yet’. I think now that the industry has total certainty that we will start to see some real change.”

Burgess believes that it is not only the regulators that advisers will have to form new relationships with, but also the product providers. “As much as the FMA says, ‘these are the standards you have to meet’, whatever is in their product provider agency agreements those advisers are going to have to adhere to as well. In any business you have to have a good relationship with your key counterparts, in this industry those relationships are changing.”

“The main issue is if you don’t meet the FAP requirements you may find yourself without a FAP licence, but even if you aren’t struck off the FSPR the product provider may terminate an agency agreement if they don’t think you are meeting the standards.”

To deal with the large scale changes coming in from multiple angles, Burgess suggests that advisers could benefit from some inward reflection. “If you enjoy being an adviser that's fantastic, focus on that. But if you are a multi-adviser FAP every time you bring on an adviser you need to spend more of your time managing, and be more of a director/supervisor than an adviser. It’s really important that these business owners are thinking, ‘do I want to be a director or do I want to be an adviser?’.”

David Greenslade, executive director of Strategi Group has said that the move from a transitional to full licence should be “an easier transition than what it has been for people to get other FMCA licences”.

In saying that Greenslade points out that the relative ease is “provided the adviser has good documentation”.

“For a business of a reasonable scale that already has processes in place then it is not going to be an overly difficult process for them to get their full FAP licence. Where it gets difficult is where you are an RFA who has never been exposed to licensing, and you haven’t gotten everything well documented. For these people, which do make up the vast majority of the industry, it is going to be a leap for them to get there.”

Greenslade says that while this leap is not impossible, the key challenges that advisers seeking full licences will need to meet are client engagement and technology.

“This is about re-engineering your business around client interest and delivering processes that provide good customer outcomes. And not just the customer outcome that is compliant with the regulator, it means that it is simple enough for the client to understand, that they feel they are getting value for money and that they understand the benefits of what they have purchased.

“Many advisers have been more focused on selling the product than selling the solution.”

Alongside customer outcome is the equally important aspect of incorporating technology. Greenslade explains that “these days more clients want to receive more information in a shorter space of time for a lower price. The only way to do that is through technology. Advisers have to identify what technology solutions they are going to use and integrate them into their advice process.”

“They need to think ‘What can I automate? What do I absolutely need to do as a human? And how can I use technology to build disclosure into the advice process?’.”

Advisers looking to make these changes do not have very long to do them. Greenslade reminds that “these changes are huge. March 15 is only four months away. There is so much you have to do between now and then. There is still a lot of work for advisers to do.”

Tags: Compliance Refinery David Greenslade licensing new regime Steve Burgess Strategi