Industry ‘report card’ far from straight As says FMA

The FMA says just four new licences have been approved and two declined with one application dismissed due to a shoddy cut-and-paste job.

Thursday, April 29th 2021, 10:00AM

by Daniel Smith

John Botica.

Almost two months on from the start of the new regime, the FMA has shared a report card on how the financial services industry has adapted to changes brought about by the FSLAA.

Speaking at the Financial Advice New Zealand “Bring in the Experts” webinar recently, FMA director of market engagement John Botica said overall the industry has responded well to the changes but there were some concerns.

“To see over 3000 financial advice providers, together with 10,000 advisers and 12,000 nominated representatives tells us that the industry stepped up to the mark.”

Botica said other positives on the report card were the numbers of advisers applying for full licences was starting to pick up.

“We are starting to get a good flow of full licence applications, and we are starting to see those licence approvals [coming] through which is great to see.”

But the report card was far from straight As.

On the negative side, Botica noted that many could be doing better at linking advisers to the FAP on the FSPR.

“It is really important not to forget to do this. You really don’t want to get to the end of June and be facing the very real possibility of being deregistered from the FSPR.”

Another concern was the misconception that the two-year transitional licence period was a timeframe where the obligations of FSLAA did not apply.

Botica said this is just wrong.

"All obligations under the new regime took place on March 15. The transition period is in respect to moving to a full licence and to your approach to competency.”

The other low grade on the report card was related to adviser websites not being updated to reflect the new disclosure rules.

“Where we see genuine mistakes we will be sympathetic.

“But it would be remiss of me to say that when we come across websites that blatantly have not been updated, or are still referring to old terminology, you will see us being far less sympathetic to those sorts of issues. We will be taking action.”

Possibly the best way to judge the report card of the industry is to look at the current standings of full licences. At this point there have been 12 applications for full licences, four have been approved, six are pending, and two have been declined.

One of the declined applications was turned down because, as Botica says, “they rushed in at the gate, literally read the guide and pasted our sample answers into the question set”.

Botica said the adviser behind the second denied application was “a single adviser business who applied for a class 2 licence thinking of the future, but was unable to answer questions around how they would be able to manage the competency of other advisers in their business".

“Again, someone who didn’t put the homework in.”

In conclusion, Derek Grantham, principal consultant at the FMA put it like this, “Advisers have stepped up, but there are still some things to do to finish off the job.”

Tags: Financial Advice New Zealand FMA FSLAA FSPR licensing new regime