Authorised financial adviser (AFAs) numbers have soared over the last 12 months to reach almost 2,000 as a regulatory deadline and impending regime change triggered action.
The latest Financial Markets Authority (FMA) data published in March has an AFA count of 1,998, representing an increase of about 140, or 7.5 per cent, compared to the same time last year.
During the 12-month period almost 200 new AFAs were licensed, indicating about 60 advisers exited the industry over the year.
AFA numbers have been stagnant or falling almost since the adviser category emerged in 2011/12 as the 2008 advice reform law came into force. Current AFA numbers are on a par with the peak levels identified in the 2013 forensic industry study, ‘AFA Today’. By 2016, adviser numbers were languishing at about 1,860, according to the follow-up ‘Last of the AFAs’ report.
In a statement, the FMA says AFA numbers surged late last year as advisers rushed to meet a deadline for recognition of an existing educational qualification.
“The code of conduct for AFAs that came into force on 1st December 2016 included the transition measure that the old National Certificate in Financial Services (Financial Advice) (Level 5) would continue to be recognised for authorisations only up until 1st January 2019. (Code standard 16 in the Code of Professional Conduct for AFAs),” the FMA says.
However, advisers can still apply for AFA licensing with the old educational qualification as long as they intend to offer “restricted financial services”
“Those authorised in this way can only provide advice in relation to category 2 products,” the FMA says.
Last year the regulator told advisers most AFA licence applications relying on the old educational qualification would have to be lodged by November 1
“The Licensing Team dealt with an increase in applications because of this and resources were applied accordingly,” the FMA says.
But the last-minute rush to earn AFA status is likely to intensify before the designation is phased-out under imminent financial advice reforms. The Financial Services Legislation Amendment Bill (FSLAB), currently 13th on the parliamentary waiting list, replaces the existing three adviser designations with just two: ‘financial adviser’ and ‘nominated representative’.
“We also expect to receive a high number of AFA applications in 2019 in the lead up to the new regime,” the regulator says. “The draft code of conduct for the new financial adviser regime has indicated that having AFA authorisation under the existing regime will assist applicants to meet the competence, knowledge, and skill requirements to provide financial advice in the new regime.”
About 30 of the latest batch of AFAs are employed by Cigna Life, which recently bought the ANZ life insurance business. Both AMP and Craigs Investment Partners took on about a dozen new AFAs each since January 2018.