Under the new Financial Markets Conduct Act, which comes into force next year, advisers who offer class DIMS will need to be licensed.

Authorised financial advisers will be able to continue to offer personalised DIMS services under the Financial Advisers Act.

PAA board member and consultant Angus Dale-Jones said the fact that class advice was counted as higher risk than personalised under the FMC would require many advisers to up-end their thinking.

“In advice, the higher level, more complex advice is personalised. But with DIMS the reverse applies. There are higher licensing conditions applied when an adviser is managing a pool of clients. In my view, it’s a shame they’ve used the same terms because advisers are used to thinking that if they are only offering a class service, they can get away with less paperwork.”

The FMA last week issued a consultation paper on the proposed requirements for licensing.

Dale-Jones said they were aligning managed funds with DIMS, which was progress. “But AFAs need to get their heads around a new way of operating. From that magic date next year, class DIMS cannot be provided by an AFA.”

It would be easiest for advice businesses that were already structured like managed funds organisations to make the change, he said.

Some advisers would need to restructure their businesses. While consumers would be most affected by the requirement that DIMS providers use an independent custodian, Dale-Jones said advisers would find the biggest new requirement was the need for financial and professional indemnity insurance. “It might take it to a level they’re not used to.”

Some would likely decide it was not worth getting a licence. “Everybody in the industry reassesses what they want to do, whether the costs and obligations associated with the licence make sense.”

Dale-Jones said the FAA had always been a temporary fix in the DIMS space, because the risks associated with managing money were quite different to those that came with advice.