Groups at licensing crossroads

Groups planning to operate under the new financial advice regime without a FAP license may be “left wondering what the future holds”, according to the CEO of NZFSG.

Brendon Smith

Brendon Smith predicts it will be a challenge for groups to operate unlicensed as the new regime kicks in over the next year. “My personal view is that as a group, if you’re not going down the licensed path you’d probably be wondering about what the future holds.

“I’m happy to be proven wrong about that. Not going down that path wasn’t an option for us,” Smith added.

Some groups remain undecided about their setup under the new regime. Some initially planned on letting their members taking FAP status rather than doing so themselves, but have faced pushback from lenders, sources said.

Smith said the new regime represents a chance for the sector to professionalise and for head groups to take a more central role with back office functions and compliance.

“We always felt taking a leadership role in terms of regulation and compliance was important to us,” Smith said. “That’s what we’d been trying to move towards anyway, and taking a license was a no-brainer and adds value to our members. It’s right for us and our members.”

He said the group’s decision to be take a license was “well-received” by members, but the group wouldn’t force its members to become FAs under the NZFSG FAP .

“There may be businesses who want a license in their own right and have the scale and capability to do that, and will still partner up commercially. It’s not a one size fits all.

“There’s authorised bodies and FAs under the authorised body as well, that is part of the consideration, as most advisers trade as limited liability companies,” Smith added.

He said regulators had not yet defined what groups should do under the new regime.

“We’re not having discussions where we’re being told we definitely have to do something, but we’re seeking available guidance that’s available.  No one is mandating and saying ‘you have to do that’,” he said.

He said the new regime would present an opportunity to further professionalise the sector, something that should be welcomed by all advisers.

“It’s all about good consumer outcomes, for us and others to do the right thing and lift professionalism in the industry. We want to be seen as trusted advisers going forward and it’s all part of a journey. We should embrace it because it’s coming anyway, you have to be on board. It’s about having a more professional businesses at the end of the journey.”

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