Full licencing - what does it look like?

Now the dust from March is settling and advisers have got their heads around most of what is required, it's time to start pushing forward with getting full licensing done.

Tuesday, September 21st 2021, 1:58PM

by Jon-Paul Hale

But what does that look like?

I sat in on the session Partners Life did on getting through the licensing process with Mark Banicevich. It was a damn good session and one you should get along to if you have a transitional license and are yet to get started on the full license process.

So what's the story with those who haven't made the move? And yes, I'm one of them.

I thought we could tackle it when it's a little quieter in the new year to get it polished up and done.

Mark's point was excellent, get started and chip away at it. Once you have the everyday things you need to do in place, you're pretty much ready to submit the application.

I've got most of it already in place and working, I just need to go through the process.

Many advisers won't be, and that's why the process needs to be started sooner rather than later.

The second issue is risk management, those that do risk management should not be surprised. If you wait, you potentially become one of the many that the FMA can't get to in time.

The FMA has said that by June 2022, it needs to be in for it to be completed in time.

What's the risk? If you do not have a full FAP license in place by March 2023, your business can not trade.

One of the core areas that full licensing covers is business risk management across the board. If your planning means that you run the risk of not having a license to trade, you're failing the very first principle of the whole licensing process, not managing the existing most significant risk to your business.

Sure, Covid and lockdowns are not helping cash flow, that's a given and one that will sort itself out.

But that isn't the most severe risk although cash flow management and financial stability are significant risks to manage.

If you want to get a license, you need to demonstrate that you have sufficient systems and procedures in place to manage risk. It should be a no-brainer for our industry, but it is not.

On the type of licence, you are considering and if you are a single adviser you need to think about the future.

You may not want to grow by adding advisers but your succession plan doesn't have to be a dramatic exit either.

With licensing, our businesses will have a value that is more than just the revenue from the client base. The license has value and purchasing a going concern will be desirable over a startup that has to get everything in place, get their license, and then their agencies to even start in our industry.

This means that the options for succession now include bringing on a succession partner, a majority owner with you part-time or at reduced hours and responsibility, to a schmoozing role with the key clients of the business - it's your call on what that may look like.

But you're likely to have to need a Class 2 license to do that effectively.

Class 1 licensing will require you to cease giving advice when a successor comes in, or you will have to go through the process of applying for a Class 2 license at the time.

Do yourself a favour, pay the extra $150 and get the better license for the future of your business.

Also, that newbie coming in may want to grow the number of advisers in the business, so a Class 2 license will be more valuable to them as well.

Lastly, education - you should be getting this sorted or have a plan to get yourself sorted by March 2023.

I've covered this in more detail in a previous article for Good Returns - you need to consider the bridging course if you have the older qualifications.

* If you have NZCFS Level 5 V1 Core and product advice strand, you need to add the Financial Advice strand to this, which the bridging course is the only effective way to get that added.

* Those on the older Certificate in Financial Services need to consider their options. In the future, to upgrade your qualifications to the NZCFS V2 level, you will have to either do a bridging course for each paper or redo NZCFS L5 V2.

* A case of how long do you plan to be here, as I fully expect the Code Committee to update this in time to remove CFS Level 5 from the list. Think over five years is my guess.

The critical point on getting qualified is that regardless of qualification, you need to ensure you maintain competency to Code Standard 9, which will change again with the enactment of CoFI later this year.

On the subject of education and applying for your full license, they are not connected. You don't have to prove your qualifications to get your FAP license.

The license is for the business, not you personally, which means there are no qualification requirements for the company.

Qualifications apply to the adviser giving the advice, and that is you personally. You have the exemption for not having this in place until March 2023.

The lack of completed qualifications is not a barrier to getting your full license application underway.

And given that a good number of us are in lockdown and Level 3 for the foreseeable future, maybe spend some time on this while we get through it?

Tags: FAP Jon-Paul Hale licensing Opinion