Applications show small advice firms still see future: FMA

It has approved almost 800 applications for a transitional licence, representing 5,500 advisers.

Another 200 had started the process with the Companies Office but had not yet made an application to the FMA.

Director of market engagement John Botica said, while the rate of application had slowed, there were still applications made daily.

The new regime will now not begin until at least March next year.

Botica said he was happy with how advisers had approached licensing and the decisions made.

The applications made represented the expected shape of the adviser market, he said.

“It’s what I call a barbell – a large number of very small adviser firms down one end with five or fewer advisers at the other end – and a small number of large organisations engaging a large number of advisers … we’re not seeing a major change to the shape of the market through licensing.”

Eighty per cent of the applications received so far would represent the “smaller end of town”, he said.

Botica said crises such as the Covid-19 outbreak showed the value of advice, although the conversations involved could be emotionally hard.

“For a few it’s financially hard. From what I can see many have been really focused and have done just an amazing job.”

Professional organisations and product providers had also worked well with advisers to deliver support, he said.

“Undoubtedly it has been a tough time for some and they’ve had to tighten their belts. [But] most will probably get through the cycle and be rewarded on the other side. No one knows how long it will go on for or what happens next.”

Botica said he expected the rate of licence applications to pick up again in another month or so.

In June, the FMA will start consulting on the standard conditions for full licensing.

Botica said the full licence application process would be completely online and it would be an expanded version of the transitional licence process.

“In the meantime, we urge advisers who have not begun the transitional licensing process to continue to give careful thought as to how they will operate in the new regime,” Botica said.

“Our options tool, website materials and resources from other Government agencies have helped thousands of advisers navigate their options under the new regime. Generally, the feedback we continue to receive is that the transitional licensing process is straightforward and efficient.”