The financial advice regulatory regime is now in full effect
The Financial Markets Authority (FMA) has announced a major milestone in the new financial advice regime.
The FMA said full licensing is now in full effect, which means all financial advice providers (FAPs) must now hold or operate under a full licence from the FMA if they want to provide regulated financial advice to retail clients.
This follows a successful two-year transition period, wherein FAPs were allowed to operate under a transitional licence.
The requirements were introduced through the Financial Services Legislation Amendment Act (FSLAA), which includes adherence to the Code of Professional Conduct for Financial Advice Services and its standards of ethical behaviour and competence, knowledge, and skill. All advisers are required to be part of an approved disputes resolution scheme that clients can use free of charge in the event of any problems.
Michael Hewes (pictured above), FMA director of deposit taking, insurance, and advice, said it’s taken a lot of people a lot of work to get ready for the new regime in the four years since FSLAA was passed in 2019.
“We want to acknowledge the considerable efforts of the thousands of New Zealanders who work in the financial advice industry, as well as those who represent them at professional adviser bodies, and our public sector partners at MBIE, the Companies Office, and the Code Committee,” Hewes said.
“We’ve been impressed at how many advisers have recognised the opportunity and willingly done the mahi to meet the new requirements. Collectively, these efforts have further strengthened the sector as a whole.”
During the transitional period, more than 2,500 FAPs, including sole operators as well as small firms and large entities employing multiple advisers, were either directly licensed or operated as an authorised body as of March 17.
“The total number of advisers covered by those full licences will be known in June, once their details have been linked to each licence-holders’ registration on the Financial Service Providers Register,” Hewes said.
Quality financial advice is particularly relevant in the current environment to help Kiwis navigate challenging financial decisions.
“The new regime is designed to give people greater confidence to go and get professional advice while making important financial decisions – like planning for retirement or getting the best mortgage structure or insurance policies – and greater confidence in whatever advice they receive,” Hewes said.
“Our focus on advice will now turn to monitoring and supervising the licensed advice providers, having finalised the questions for regulatory returns that licensees must file every year, the first due in September 2024.”
FMA said the first annual FAP reporting will be from July 1 to June 30, 2024, with the first annual returns due on Sept. 30, 2024.
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