The industry is rife with mixed messages regarding the cost and risk of operating your own FAP. Care needs to be taken when deciding which path to take as your decision in coming months may cement your destiny for many years to come.

Where do you want to be in 2023?

If you don’t have your own clients and just want to be a fantastic adviser, taking minimal risk, and earning a salary, then consider joining a FAP as a financial adviser or nominated representative. The FAP will set the rules, provide the clients, and determine what sort of regulated
financial advice you can provide and how you provide it.

If you have your own clients, want to build equity in your own business, are prepared to take some business risk and invest into your business, then becoming a FAP is a viable solution. If you become an authorised body (an unlicensed FAP) then you still have risk plus you need
to follow the rules of the licensed FAP. Becoming your own FAP means you take on a bit more risk, but you control your own destiny and you have the potential to build greater value in your business.

What about the cost?

The direct costs associated with getting a FAP licence are not huge. You should budget about $2,000 plus GST for the various FSPR and FMA fees and levies. If you want a paint-by-numbers template for a small FAP operations manual and licence application that you customise, then that is only $3,000 plus GST from Strategi. If necessary, add in about  $2,000 for some consulting or application checking time. Potentially, you could have your full FAP licence for about $7,000 plus GST. However, Greenslade recommends you should be prepared to spend $10,000 as you may want to make a few business changes as part of becoming a FAP. His advice is that if $10,000 is too much to pay, then working as an  employee of a FAP is the logical pathway.

Greenslade explained that the ongoing compliance costs for a small FAP are also relatively cheap and may be around $3,000 – $4,000pa for a two-adviser FAP. He believes that if you use the FAP licensing process to streamline your business, then your improved efficiency will more than offset the small ongoing compliance costs. Additionally, the annual  increase in the capital value of your business will far exceed the compliance costs.

Greenslade believes small licensed FAPs should align with a network that can enhance their business from a support and remuneration perspective.

A Key Strategi takeout

If you want to build a business, then be prepared to take some risk and invest into becoming your own licensed FAP. If you are capital and risk constrained, then joining a suitable FAP is the way to go.

For more information on Strategi’s FAP licensing solutions, please click here.  

Alternatively, you can contact Strategi via:

Email: info@strategi.co.nz 

Phone: +64 9 414 1300

Website: www.strategi.co.nz