Vidler is concerned the current numbers of transitional licences the industry has seen from the FMA do not reflect the true health of the industry.

He believes the New Zealand financial advice industry is about to go through a serious rough patch, which could see the loss of a large percentage of single adviser FAPs.

One of the key drivers of this, according to Vidler, is “a large proportion of advisers who have their transitional licence who still have little idea what getting a full licence actually involves.”

“I would suggest that advisers in this boat are a quarter or a third of people who have transitional licences.”

Vidler pulls no punches with this sector of the market.

"There is a level of ignorance which is stunning. Also arrogance in some parts, and it is an unhealthy proportion of the market.

“Certainly the majority of advisers have made legitimate and serious investment to become compliant.

“The ones who are still short of the mark, are not short on the ethical or moral standpoint, it is more getting their business ready for commercial development.”

For those advisers who remain unwilling to raise their businesses to the standard of a full licence, Vidler sees two solutions.

One is for advisers to ditch their single adviser FAPs for the safety of a large aggregate.

“It is probably the right thing to do for hundreds of advisers to go under the umbrella of a large company like NZFSG and be told how to do it. That would probably be better from a market point of view.”

The other solution sees a multitude of micro-mergers – single FAPs coming together to form small multi-adviser shops.

“This will be significant. There are a lot of one man bands who have applied for their transitional without any real comprehension of what the costs are.

“Costs are not just licensing and levies, it is infrastructure, staffing, these one man bands are in danger of losing client facing time.”

Vidler says this will be an option particularly taken up in rural areas.

“When you get out of Auckland and Wellington, advice is fundamentally a provincial business. The advisers around the country are rooted in their local communities and they have to be generalists.

“I think that what will come is a lot of micro-mergers of one or two man bands coming together to form three or four man bands. I think this will probably be a very successful model.”

Despite the rocky settling in period that Vidler predicts, he does have high hopes for the future of advice.

“For those businesses that come through this period, I think they will be very robust, and very well placed over the long term. Some may fail, but most won’t. They are a pretty hardy bunch, these advisers.

“I think in two to three years’ time, the independently owned advice businesses are going to be in a good place.”