A survival guide for financial adviser licensing

His thoughts apply to each of insurance, investment, mortgage and comprehensive planning advice businesses.

Quick overview of this commentary

There is little information available on licensing of financial advisory businesses. This commentary is based on what is available from MBIE/FMA, plus lessons from the licensing of fund managers and DIMs providers. Fund manager and DIMs licensing is relevant as Section 396 of the Financial Markets Conduct Act sets out the structure for the FMA to grant market licenses. Section 396 has three key components for licensing:

• prescribed eligibility criteria
• directors and senior managers being fit and proper to hold that position
• capability of effectively performing the service

As a boutique fund manager, we faced licensing with the same apprehension many adviser businesses now have. Yes, it took time and energy to get through the process, but we managed to run virtually all of the licensing process ourselves with relatively little money spent on external advisers/consultants. The purpose of this commentary is to get advisers prepping for licensing. This means thinking about the business, its processes and its systems – and, more importantly, how to coherently articulate what the business does.

What are MBIE and the FMA trying to achieve?

The world changed for advisers when the Financial Advisers Act 2008 was enacted. Further significant changes are proposed under the current Financial Services Legislation Amendment Bill. From an advice delivery perspective, the changes are intended to provide flexibility and clarity, such as: