It's taken what seems like forever, to get to the start of transitional licensing for financial advisers. Despite having all this time to prepare many advisers still seem unsure about what route to take.

There is an expectation that there will be thousands of FAPs once transitional licensing closes next year. However, there are signs this maybe changing. At the TMM Better Business Conference for mortgage advisers the number of people who said they would set up their own FAP was very low. As were the number of undecided people.

In talking to people around the advice industry there appears to be a bit of a sea change taking place as advisers get to grips with the additional costs and compliance that will be imposed on any business which is a FAP.

I'm guessing the number of FAPs will be fewer than what has been predicted. This, no doubt, will be music to the FMA's ears as it does not have the capacity or resources to manage thousands of FAPs.

THE UNKNOWNS

There are still many unknowns which may shape what businesses look like in the future.

Unknowns include the disclosure rules and what the Government will do around conduct and culture.

For mortgage advisers only two of the big banks, ANZ and BNZ, have come out and declared what their position will be with regards to FAPs and who they will work with.

In the life insurance space I'm not sure any of the providers have stated their position regarding FAPs and accreditation. Let alone what they will do with regards to remuneration.

Override commissions, which many of the groups lived off have gone. No doubt that pot of money will still be spent on distribution, but how is going to be something to watch closely.

It is good to get rid of overrides as the money in the past hadn't been used as the life companies intended. Any money spent this way should be to help advisers improve their practices and raise the level of professionalism.

And of course there is the vexed question of how much it will cost to either be a FAP or belong to one. Numbers like $21,000 a year have been suggested by one mortgage group, while an investment group CEO suggested to me that the cost will be considerably higher. That would be no surprise as the risk and potential liabilities around wealth management are arguably much higher than home loans.

There is likely to be a race to the bottom on price – we see it in some sectors now.

To wrap things up there was a comment this week that the FMA has been too soft on licensing, giving the impression it will be easy, inexpensive and not too onerous. That may be true for transitional licensing, but it will be a different picture when full licensing kicks in and costs like auditing, compliance, CRMs and professional indemnity insurance become clearer.