FAP or Fiction - Five Clues

Many of us are trying to decide whether we go it on our own as a Financial Advice Provider (FAP), or succumb to the many appeals to join someone else’s FAP. And naturally, that activity has increased since some providers in New Zealand have indicated that income may go to the FAP entity that takes responsibility for your advice. This has meant dealer groups and large agencies are working hard to ensure their traditional income is sustained by going after as many Advisers as they can to come under their FAP. Which makes perfect sense, but can they deliver?

It's potentially a good idea to come under another’s FAP so they can do they hard work of governance and accountability, and you can get on with just looking after your clients.

For some that will be a welcome reprieve. But before you make that call, there are some considerations:

• Firstly, if you are writing say $100,000 API your FAP/Dealer Group will get as much as $30,000 from a provider: Are you getting $30,000 worth of value from that FAP, or can you apply those funds under your own licence to secure what you need independently?
• Secondly, does that group have the culture, controls and gravitas to protect you from another adviser business’ breaches? If the overall FAP is shut down because a renegade adviser is not following the rules, and the FAP doesn’t have the mechanisms in place to both position and manage the conduct of the FAP adherents, you will need to stop trading along with the others under that FAP.

So be certain you have done your own due diligence on a proposed FAP relationship before jumping in by considering these 5 things:

Culture

Does this FAP have the leadership and legacy of looking out for clients’ best interests and putting them in priority?

Have they modelled a culture committed to attracting advisers with integrity or have numbers been the main driver for recruitment? Have they demonstrated leadership in dealing with renegade advisers who have committed breaches in the past?