A Simple 6-Step Guide to Applying For Your Financial Advice Provider Licence

Applying for your own licence

If you’re currently an authorised or registered financial adviser running your own business, there’s a high likelihood you’ll be applying for and maintaining your own Financial Advice Provider (FAP) licence in the new regulatory regime. If you’re still considering whether or not you should be licensed, you might like to read this article. The Financial Markets Authority have said they are preparing for approximately 2,000 transitional licence applications, which would see a large portion of the industry applying to maintain their own licence in the new regime.

This article has been split into three sections:

  1. What to do prior to licensing
  2. What to do during the transitional period
  3. What to do once the transitional period is over and the new regime is in force

What to do prior to licensing

You’ve made the decision to become a financial advice provider and maintain your own licence in the new regime. What will you need to do, and when will you need to do it? It’s important to know this list isn’t final, as legislation is not yet operational, and key guidance is yet to be delivered on exact licensing steps. However, it should give you a good idea of things to consider prior to the transitional period coming into force.

  1. Read our guide on upcoming changes to the FSLAA
  2. Decide if you will licence
  3. Apply for your transitional licence
  4. Make sure any sub-advisers are engaged by your FAP
  5. Financial Advice Providers and Financial Advisers must be registered on the Financial Service Providers Register.
  6. Make sure you have adequate processes in place to comply with the Code of Conduct for financial advice, and new duties on advisers.

1. Read our guide on upcoming changes to the FSLAA

If you haven’t read this already, click here to learn more about the upcoming changes.

2. Decide if you will licence

This article will help you make an informed decision as to whether you should apply for your own licence.

3. Apply for your transitional licence

Applying for a transitional financial advice provider licence will happen through the FMA’s website. The FMA have mentioned it’s best to get in early as they are expecting a high number of applications. The sooner your application is in, the more likely it is you’ll get a fast response.

Transitional licences will be less heavily scrutinised than full licence applications. Just because you apply for a transitional licence does not mean you need to also apply for a full licence. If you change your mind during the transitional period you can always become authorised under someone else’s licence in the future.

The cost of applying for a transitional licence is likely to be $363. Plus $39 per authorised body named in the application. These fees will be GST exclusive.

You will need to be able to provide information about the following as part of your licence application:

4. Make sure any sub-advisers are engaged by your FAP

If you have financial advisers providing financial advice on your behalf, you will need to make sure you have adequate processes in place to monitor and control those advisers. They are providing advice on your behalf. You must therefore take all reasonable steps to ensure they comply with the legislation.

If you have an authorised body named on your licence you will need processes in place to oversee the conduct, advice and actions, and for ensuring it meets all market services licensee obligations. Remember you’re jointly liable with the financial advice provider for the advice they deliver.

5. Register on the FSPR

Next up, you’ll need to register on the Financial Service Provider’s registrar.

Initial financial advice provider registration is expected to be $460. Annual levies will be charged thereafter at $230, plus $1,106 if the financial advice provider gives advice on its own account.

Each sub-financial adviser, regardless of how they are covered by a licence will also need to be registered on the FSPR. The renewal for a financial adviser is $267. A financial adviser may be engaged by more than one entity, so MBIE suggests that financial advisers pay this fee, rather than financial advice providers.

All values exclude GST, and exclude FSPR fees, and are yet to be 100% finalised. As you can see, fees are going to be higher, but they are not unreasonable considering we are moving into a licensed environment with government oversight.

6. Prepare your processes for complying with the Code of Conduct for financial advice

The code was approved in May 2019, and there will be at least nine months before it comes into force, enabling advisers to make any changes that they need to comply with it. Exact dates will be determined once the FSLAA is passed. You can read more about the Code of Conduct here.

Operating during the transitional period

It’s important to understand what happens during the transitional period, where the government will shift from the old to the new regime.

New duties placed on advisers will be in force from the beginning of this period. They are outlined across the new legislation, regulations and Code of Conduct for financial advice. There will however be a ‘competency’ safe harbour for previous industry participants which will give you time to get any required training completed.

  1. Complete New Zealand Certificate in Financial Services NZQA level 5 (NZCFS5) or equivalent for all financial advisers in your FAP

Begin preparations for your full licence

Full licensing will be more involved than transitional licensing. Licensing is risk-based. Applicants who pose a higher risk will receive more scrutiny than low risk applicants. This should make it relatively easier for individual advisers than large companies.

Fees for applying for a full licence:

There is a two-year period during which all financial advice providers must obtain a full licence. The fees are GST exclusive and vary depending upon the type of entity:

  • Financial advice provider with a sole financial adviser, or that only gives advice on its own account (e.g. digital advice), $575;
  • Financial advice provider with more than one financial adviser, $730;
  • Financial advice provider with nominated representatives, $885;
  • Authorised bodies named in an application, an additional $155 each.

Operating under the new regime

After two years, the transitional licence period ends, all remaining transitional licences expire and advice can no longer be provided under a transitional licence. If you’re a financial advice provider, you must have a full licence to continue providing financial advice. If you’re not applying for your own licence, you must be engaged by a licensed financial advice provider who covers you under their licence. The competency exemption also expires and you must meet the competency requirements under the legislation, regulation and Code of Conduct. Once you have your full licence, it’s vital to ensure you remain compliant in the future. Setting up a Compliance Management System plays an important part in operating your licence.

Summary

If you’ve decided to apply for your own licence, there are a number of steps you need to follow to ensure that you’re ready for the upcoming changes. To recap, these are:

  1. Read our guide on upcoming FSLAA changes
  2. Decide if you will licence
  3. Apply for your transitional licence
  4. Make sure any sub-advisers are engaged by your FAP
  5. Register on the FSPR
  6. Prepare your processes for complying with the legislation, regulation and Code of Conduct

There are still at least 9 months before the new regime will take effect, so you have time to decide if you’re going to licence and if so, to get your business set up with one.