John Botica, director of market engagement at the FMA, spoke to a Financial Advice NZ webinar after the regulator released its consultation document on proposed standards for full licensing.

The FMA is proposing a range of classes of full licence in the FSLAA regime, according to the size of the advice business. It is also intending to require applicants to meet eight criteria: record keeping, internal complaints process, regulatory returns, outsourcing, professional indemnity insurance, business continuity and technology systems, ongoing capability, and notification of material changes.

The consultation document was released on Wednesday. Botica said 1,058 people had downloaded the consultation document before the end of that date. He said each submission that was made would be read and assessed. “We thank you all very much for your enthusiasm.”

Consultation is open until August 7.

Botica said the professional indemnity insurance required was a hotly debated topic. Many advisers had strong arguments for requiring and many disagreed, he said. Some had said it was expensive and did not give as much protection for consumers as people might think while some firms had said they were not going to do business without it. The FMA wanted to hear feedback, he said, on how hard it would be to get cover that was proportionate to the size of the business.

Botica said advisers should think through the options available to them. “You’ve told us often how important it is to give consumers the right information at the right time to make good decisions. The same thing should apply to you as well around your future wellbeing and business.”

It would be important to thoroughly examine any FAP an adviser considered joining, he said, because any negative attention the FAP's brand received could also stick to its advisers.

Advisers should talk to the FMA, their association and product providers to help work out what the best path forward was for their businesses, he said. “Any question you have to ask is a good question. We don’t store that as intelligence against you when assessing your licence application.”

He said full licences would be categorised into classes to make the application process as streamlined as possible. It would enable the assessment process to be aligned to the type of business and recognised the diversity of structures in the industry, he said. “Each class will have tailored questions and assessment based on the complexity of the structure.”

So far, 846 transitional licences have been approved or are being assessed.

Anyone giving personalised financial advice will need a transitional licence when the new regime takes effect, probably in March next year. Two years later, they will need to have a full licence.

Botica said there were 5,855 financial advisers working for those 846 transitional licence applicants and 6,800 nominated representatives. In total, 46% of licences applied for so far were for single adviser businesses and 49% for businesses with two to 20 advisers. Only 5% of licences were for businesses with 20 or more advisers but they represented 3,150 advisers and 6,500 nominated representatives.

He said recent months had been challenging for everyone in the industry.

But he said he had heard many examples of advisers working “tirelessly” and helping clients.

“I get the sense that you’ve emotionally been right where you’ve needed to be to help clients. Advisers have been acting as an emotional firebreaker for clients through this period.”

It was a testament to the strong future for advice, he said, where it would continue to be desired and prized. The changes planned should benefit everyone he said. They would “drive the industry up the professional curve”, he said, and provide protection for adviser businesses.

“The challenging financial landscape in the future does nothing more than fuel the need for ongoing financial advice – it all leads to building long-term value.”