One option that the FMA discussed at their roadshows last year involved advisers operating as authorised bodies where they come under another entity’s licence. In such a scenario, these authorised bodies will also need to operate as FAPs although they will not need to hold a separate licence.
While this arrangement may be suitable in some situations, Wealthpoint questions the efficiency of this type of structure for small advisory businesses. Simon Manning, Wealthpoint’s CEO, says that historically advisers joined dealer groups to, amongst other things, gain access to certain suppliers and for commission aggregation purposes. However, in future, advisers whilst still needing critical access to suppliers, will also want to align with groups that offer high quality business and compliance support and efficient processes that allow them to focus on their core role – servicing client needs.
Structures that require advisers to duplicate the compliance systems, controls and monitoring processes that the group FAP must also have in place seem counter-productive and inefficient. In addition, there is potential for confusion from clients around which FAP would be responsible for the advice provided – would a client think it was the FAP in which the adviser operates, or the group FAP that holds the licence? Would they understand the difference?
Simon Manning says Wealthpoint have addressed these issues directly through the structures they have put in place with their 50+ member businesses and 150+ financial advisers. Wealthpoint is an independent co-operative where the shareholding "members" are the advisory businesses however the individual advisers hold Practising Agreements directly with Wealthpoint.
These Practising Agreements set out adviser compliance obligations and importantly, it means that advisers operating under Wealthpoint’s structure do not need to set themselves up as authorised bodies/FAPs. Instead, advisers can rely directly on the compliance controls co-ordinated through Wealthpoint’s head office.
This model delivers a far more efficient and cost-effective compliance structure for advisers where the need for duplicated controls are eliminated.
Simon Manning believes their FAP group structure is unusual as most dealer groups he is aware of appear to fall into three camps currently – most will require members to be authorised bodies, some will significantly reduce member numbers if they operate without requiring authorised bodies and others still haven’t confirmed what FAP structure they will operate, if any.
For more information on Wealthpoint visit www.wealthpoint.co.nz/about-us/ or call (09) 972-0470.