The financial advice provider (FAP) universe could shrink by half under the impending full-licensing regime unless applications pick up over the next few months
Based on figures supplied by the Financial Markets Authority (FMA) just 900 advisory firms have applied, or indicated they will apply, for a full FAP licence compared to the 1,800 or so operating under the transitional regime.
According to the latest FMA update, almost 500 FAPs (or 28 per cent of the current total licensed advisory population) have already lodged full-licence applications while 400 have flagged an intention to join the upgraded regime on the Financial Service Providers Register (FSPR).
The regulator has advised all FAPs in Class 1 and 2 – respectively, single-adviser firms, and those that can hold any number of advisers (but not ‘nominated representatives) – to lodge full-licensing application by September 30 this year or risk missing out on approval before the March 2023 start date for the new regime.
Class 3 FAPs, or those able to employ ‘nominated representatives’ in addition to financial advisers and to appoint ‘authorised bodies’, face a June 30 application deadline to ensure FMA sign-off ahead of March next year.
“The FMA has been making considerable efforts to engage with the sector,” a spokesperson said, with a number of roadshows, seminars and conference speaking gigs slated over the next few months to be headlined by FMA executives in charge of the licensing push – John Botica and Derek Grantham – as well as new chief, Samantha Barrass.
Chris Revell, FMA compliance services manager, says in the newsletter that registering on the FSPR as full-licence operator is only the first step in the process.
“Make sure you check out our full licence guide and 8-step action plan to save yourself time and keep the process as straight forward as possible,” Revell says.
While transitional licensing was largely an automated tick-a-box procedure, the FMA will take a much more rigorous approach to granting full FAP licences.
Late in May the regulator issued a guidance note for advisers on expected standards of record-keeping, a key quality assurance measure for FAPs.
Prospective full-FAPs will have to provide evidence to the FMA across a wide range of operational functions including details of adviser competency, business continuity plans, cyber-security arrangements and client money-handling procedures.