Under the new Financial Markets Conduct Act (FMCA), all providers of DIMS will have to be licensed to offer class DIMS, or authorised under the Financial Advisers Act (FAA) to offer personalised DIMS.

Director of compliance Elaine Campbell said the FMA’s understanding was that very few AFAs were providing a personalised DIMS service at present. The majority were using a model portfolio. “Personalised DIMS is a bespoke investment strategy that moves clients so far away from the underlying model portfolio that it is truly bespoke for the one client and his or her needs.”

She expected at most 20 or 30 might be authorised to provide DIMS under the FAA once the new regime kicks in.

The FMA is expecting to licence about 200 AFAs for class DIMS.

But Campbell said those 200 licenses could cover more advisers as it would be the company that is licensed, not each individual adviser. “Large advisory houses may have a number of AFAs working for them who would then not need to seek out their own authorisation or licence.”

Those who offered personalised and class DIMS would only need the license, not authorisation, to do both so the number authorised to offer only personalised DIMS could be eroded further.

Campbell said the standard required of advisers would be the same across class and personalised DIMS so there was no benefit to the adviser in avoiding being licensed. “The eligibility standards have been drafted to ensure people can’t arbitrage between the two regimes.”

She said whether advisers wanted to be licensed or to carry on offering personalised DIMS, they had to take some action by the middle of next year. Those who want to apply for a license for class DIMS must do so by the end of May 31 to take advantage of transitional provisions.

Those who want to offer personalised DIMS under the FAA, even if they are currently authorised to do so, were required to file a new ABS by the same date. Campbell said: “If someone wishes to continue to provide personalised DIMS, we need to be satisfied that person meets the new eligibility criteria the law sets out.”

If advisers had previously indicated they were offering DIMS and did not apply for a license or authorisation, they would come in for regulatory scrutiny.

Some advisers have said it will not be worth offering DIMS under the new rules. But Campbell said people should not make business decisions based on regulatory change. “If you believe it is in the best interests of your client that you do not perform the service and the client sources the service elsewhere, that’s a discussion between the AFA and the client. We would be concerned if the AFA was changing their business model in response to changes in regulatory settings. Advisers performing DIMS to a high standard should be confident that they can meet the criteria.”

She said the licence criteria were flexible to reflect the processes of smaller businesses.

Campbell said while there was always room for improvement, she felt the FMA had handled the DIMS process well.  “Within the constraints we have had, we did endeavour to engage extensively.”

She said the FMA would continue to consult and make itself available to help people understand where their services might fit under the new regime.