Here we provide answers to some of the common questions about the financial advice changes. We cover legislation, licensing and how to request information. If you can’t find the answer you need, please email email@example.com.
Q: What are target application dates and why are they important?
A: To help financial advice providers (FAPs) plan ahead, the FMA has set target dates for submitting FAP full licence applications.
The target dates are:
Class 1 and Class 2 applications: 30 September 2022
Class 3 applications: 30 June 2022
Why are target dates needed? The target dates aim to help providers plan for a smooth transition to full licensing and are based on trends observed through transitional licensing. With transitional licensing, eighteen per cent of those applying for a transitional licence left it until the last fortnight before the deadline closed. That won’t be an option for full licensing. We thought it important to be clear about that well ahead of time.
Why are there two target dates?
The licence application process is tailored according to the licence class a FAP chooses to apply for. We know from transitional licensing that the majority of current licence holders are likely to apply for Class 1 or Class 2 full licences. These classes of licence are purpose-built for sole advisers (Class 1) and businesses that engage more than one adviser (Class 2). Class 3 applicants are likely to be larger organisations that engage nominated representatives.
The earlier target date of 30 June 2022 for Class 3 licence applicants reflects the greater complexity of their business structures, and the corresponding increased assessment time and scrutiny their applications are likely to require.
Approximately how long does the application process take?
The full licence application process is more comprehensive than the transitional licensing process and tailored according to the class of licence each FAP applies for. Most people need some time to prepare so we recommend applicants get started now by looking at the questions that they will be asked.
Where they find any gaps they need to address, they can then make a plan to address them, and get their full licence application in by the target date.
How long does it take for an application to be processed once it’s submitted? We currently aim to respond to applications within 60 days. However, this timeframe is likely to increase as application numbers grow and we get closer to the transition deadline.
By getting their application in before the relevant target date, applicants give themselves the best chance of ensuring their full licence is processed before their transitional licence expires.
What happens if I don’t submit my full licence application by the target date?
We will continue to accept applications for full licences at any time. However, if you’re a transitional licence holder and you don’t get your application in by the relevant target date, you run the risk that your application may not be processed by the time your transitional licence expires at the close of 16 March 2023, especially if we need to contact you to clarify any matter.
What if I haven’t been notified that my full licence application has been approved by the time my transitional licence expires?
From 17 March 2023, anyone who provides financial advice to retail clients must either hold or operate under a Financial Advice Provider full licence. If your FAP full licence is not processed in time, you will need to temporarily stop providing advice. We recommend you have a contingency plan in place. This may include having another licensed financial advice provider provide support to your clients.
What help is available to transitional licence holders wanting to apply for a FAP full licence?
In addition to the FAP full licensing application kit, and other resources available on our website, we are developing self-assessment tools to help Class 1 and Class 2 licence applicants identify where they might need to do further work to meet the full licensing requirements. A Cyber Security and Business Continuity Planning self-assessment tool has recently been published on the FMA website and more will be added.
Our licensing team is available to help. Please contact us.
Q: What’s the difference between a Class 1 and Class 2 FAP full licence?
A: A Class 1 licence is intended for sole adviser practices. You’ll need to apply for (and hold) a Class 2 licence before you bring other advisers under your licence. For more information, see How the FAP licence classes compare pdf.
A: Financial advice providers giving advice to retail customers need to either hold a licence or be an authorised body under a licence.
If you provide advice to wholesale clients only, you do not need a licence but certain duties still apply – such as the duty to give priority to your client’s interest when there is a conflict, and to exercise care, diligence and skill when giving advice. For more information, see Who needs a licence.
Q: What is a transitional licence?
A: As part of helping the sector transition to the new financial advice regime, all financial advice providers (FAPs) were initially able to operate under transitional licences. These expire at the close of 16 March 2023. By getting their application in by the relevant target date, transitional licence holders give themselves the best chance of ensuring their full licence is processed before their transitional licence expires.
Q: What is a full licence?
A: A full licence is a licence you must have before your transitional licence expires if you wish to continue providing regulated financial advice to retail clients.
If you are not applying for your own full licence, you must operate under another financial advice provider’s licence.
Nominated representatives will have less discretion than financial advisers and can only provide advice if the provider has sufficient processes and controls in place. These processes and controls must:
limit the nature and scope of the advice given
allow the financial advice provider to regulate the type of advice given and when
ensure nominated representatives have the correct competence, knowledge and skill needed for the advice being provided.
Q: Who can use nominated representatives under a transitional licence?
A: You can only use nominated representatives under a transitional licence if before 9 April 2019, you were:
a QFE, a member of a QFE group, or
a firm registered on the Financial Service Providers Register that provides class advice through staff who are not individually registered on the FSPR. The transitional licence will be subject to a condition that, in this case, the nominated representatives must not provide a personalised service.
A: Under the transitional arrangements in the Financial Services Legislation Amendment Act 2019, there is a “Competency safe harbour” built in to the transitional period at the start of the new regime. This generally means that, if you were registered or authorised to provide advice under the Financial Advisers Act 2008 regime, at the time the new regime began on 15 March 2021, you have up to two years to meet any new competency requirements. In the meantime, during the transitional period, you can continue to provide the advice you were legally permitted to under the Financial Advisers Act 2008. Note that this competency safe harbour expires at the end of the transitional period on 16 March 2023.
Q: Where can I find out more about the New Zealand Certificate in Financial Services (Level 5), version 2 that is referenced in the new Code?
A: There are a number of Tertiary Education Organisations (TEOs) that offer this certificate. For more information about what the certificate covers, and for a list of NZQA-approved providers, see the Skills NZ website.