Authorised Financial Advisers (AFAs) are individual advisers who are permitted to provide personalised financial adviser services to retail clients, for category 1 and category 2 products, depending on the scope of their licence. They can also provide class services and wholesale services. Category 1 and 2 products are described in s5 of the Financial Advisers Act 2008.
Who needs to comply
The focus is on the nature of the service, rather than the product recommendations. A service that identifies the financial situation and goals of a group of people the individual belongs to can also be an investment planning service.
you only provide a class service to retail clients, e.g. generic product brochures and online resources. These services target a wide class of people rather than being specifically tailored to meet an individual's needs or situation.
you only provide a financial service which is incidental to another non-financial service, e.g. a sales assistant advising a customer on a hire purchase contract.
you are a member of certain professions providing a relevant financial service in the ordinary course of your professional business. This exemption applies to chartered accountants, lawyers, real estate agents and others.
you are a not-for-profit organisation providing a relevant financial service without charge.
you are an employer providing relevant service to an employee in connection with a financial product made available through the workplace.
For a complete list of exemptions see s13 and s14 of the Act.
Authorisation, renewals and registration
To become an AFA you need to meet eligibility requirements, including minimum competence requirements and good character.
On 8 April 2019, the Government passed a new law changing the rules for how financial advice is provided to retail clients. As part of the transition rules, you do not need to renew your AFA authorisation before the start of the new regime.
If your expiry date is approaching, we will contact you with further information.
Your authorisation can be terminated for the following reasons:
the period of your authorisation expires
you ask the FMA to cancel your authorisation
you cease to be registered as an FSP
the FMA cancels or suspends your authorisation if you are no longer eligible to be authorised, or you have breached your obligations under the Financial Advisers Act, regulations, the Code or your terms or conditions.
If we decide to cancel, suspend or amend the terms and conditions of your authorisation, you will be notified first and given the opportunity to make submissions. We will notify your change of status to the registrar. If your authorisation is cancelled or suspended because you are no longer eligible or you have breached your obligations under the Act, we may also make this information public.
Application for AFA authorisation
Renewal of AFA authorisation
The fees above are payable to the Companies Office when you apply to become an AFA. This is additional to the fee for registration as an FSP.
Variations to terms and conditions
The fee to vary the terms and conditions of an AFA authorisation is $115. This is payable to the FMA when you apply for the variation. We will then invoice you for the time spent assessing the variation application, based on the FMA hourly rate.
You must annually renew your registration on the Financial Service Providers Register and notify the Registrar of changes. You must be a member of a dispute resolution scheme, if providing services to retail clients.
Meet your authorisation conditions
An AFA must comply with the terms and conditions of authorisation which will include:
standard conditions subject to any modifications that the FMA considers appropriate
terms and conditions specific to the AFA.
The standard conditions include requirements for the AFA to maintain an adviser business statement, provide an annual confirmation and to notify us of significant matters.
Most terms and conditions will remain in place for the term of the authorisation. The conditions can only be varied during this time in the circumstances outlined below
Section of the Financial Advisers Act
On application by an AFA (if approved by the FMA)
s55A(1) and (2)
If they are reporting or accounting standard conditions. Changes are subject to consultation
s147A(3) and 147E
For other standard conditions, in limited circumstances, such as in response to an emergency or where necessary to avoid the defeat of the purpose of the Financial Advisers Act. Changes are subject to consultation
s147A(3)(a) to (e) and 147E
If the business of the AFA has changed in such a way that there is a material risk to consumers; and/or the AFA has been or is involved in market practices that are in material respects inconsistent with the purpose of the Act
On an AFA's default
If an AFA applies to renew their authorisation new terms and conditions may apply.
Follow the Code
The Code of Professional Conduct sets out minimum standards and applies to all AFAs from the date of authorisation and while they remain authorised.
Make sure your advertisements are clear and true
A financial adviser must not advertise a financial adviser service in a way that is misleading, deceptive or confusing. This is in addition to the general requirement that a financial adviser's conduct in providing a service must not be misleading or deceptive (See sections 35 and 34 of the Financial Advisers Act (FAA).
Tell your clients what's important
You must make both a primary and secondary disclosure when providing personalised services to retail clients.
The principle behind disclosure is to provide the essential information your client needs to make an informed decision. It must not be misleading, deceptive or confusing.
Any additional information you decide to provide to a client must not be misleading, deceptive or confusing either. For example, if you decide to provide accompanying information about your qualifications, make sure your client understands the relevance to the service they are considering.
You do not need to supply us with a copy of your ABS or specify any changes you have made to update your ABS. However, we may ask for a copy of an ABS at any time to assist in monitoring.
AFA annual information return obligations
The AFA information return is an online tool that each authorised financial adviser (AFA) must complete and submit annually. It consists of a series of questions about AFAs, their business, their compliance approach and their approach to continuing professional development.
You must provide a written risk assessment of the money laundering and financing of terrorism activity you could expect in the course of running your business.
You are required to implement an anti-money laundering and countering financing of terrorism programme that includes procedures to detect, deter, manage and mitigate money laundering and the financing of terrorism.
You are required to appoint a compliance officer to administer and maintain your programme.
You are required to perform due diligence processes on your customers. This includes customer identification and verification of identity.
You are required to report suspicious transactions.
Monitoring activities include a mix of desk-based research (investigating complaints, checking websites, and reviewing documents, eg. Adviser Business Statements, professional development plans), phone discussions and office visits. We may also use mystery shopping.
We have a formal complaints process if people or companies breach requirements. AFAs who breach the code may also face the Disciplinary Committee.
The Disciplinary Committee is an independent body. It conducts disciplinary proceedings arising from complaints about AFAs relating to breaches of the Code of Professional Conduct for AFAs. The Committee may take a range of actions as a result of proceedings, including cancellation of authorisation, suspension, and censure.
In certain circumstances, it may be possible to obtain an exemption from being registered as a financial adviser or from any of the obligations under the Financial Advisers Act 2008, regulations or the Code of Conduct.
Financial Advisers Act exemptions guidance
It explains the approach of the Financial Markets Authority (the FMA) to granting exemptions under the Financial Advisers Act 2008. It is intended to provide answers to commonly asked questions in relation to exemptions and to provide information to potential applicants on the process for making an application.