Who is a Financial Advice Provider (FAP)?
A financial advice provider (FAP) is an individual or entity (e.g. a company) that provides a "financial advice service". An individual or entity provides a financial advice service if they give regulated financial advice to their clients on their own account, or they engage others to give regulated financial advice to their clients on their behalf.
To use the term Financial Advice Provider from the start of the new financial advice regime on Monday 15 March 2021, an individual or entity must be registered on the Financial Service Providers Register (FSPR).
If you provide advice to retail clients, you also must either:
- hold a Financial Advice Provider licence OR
- be an authorised body under somebody else’s Financial Advice Provider licence.
As a financial advice provider you can engage financial advisers to work on your behalf to provide financial advice to your retail clients.
You can hold a financial advice provider licence in your own name (as an individual), or your company can hold the licence in its name (in which case you, personally, will need to be engaged by your company as a financial adviser and provide advice on its behalf).
Note that holding a financial advice provider licence in your individual name means you cannot call yourself a financial adviser and you will be personally responsible for any liabilities incurred as a financial advice provider, including liabilities for breach of legal duties.
To see some of the other ways you can operate in the new regime, Explore your options here.
Registration
All financial advice providers must be registered on the Financial Service Providers Register (FSPR).
This is a public register which is maintained by the Companies Office.
How you register will depend on how you intend to operate in the new financial advice regime. For more information, see the fact sheet Registering correctly on the FSPR.
Any authorised bodies under your licence, or financial advisers you engage, must also be registered on the FSPR.
At the start of the new regime, you will need to update your registration on the FSPR to link to any financial advisers you engage under your licence. You will have three months to do this from the start of the new regime.
More information about how to do this will be provided on the Companies Office website when available.
Licensing
There are two phases to financial advice provider licensing: transitional and full.
Transitional licensing
Financial advice providers will initially be able to operate under a transitional licence and will have up to two years from the start of the new financial advice regime to obtain a full licence.
Find out how to apply for a transitional licence here.
Full licensing
After two years, the transitional period ends, all transitional licences expire and advice can no longer be provided under a transitional licence.
To continue providing financial advice after the two-year transitional period, anyone (individual or entity) who provides financial advice to retail clients must either hold a full Financial Advice Provider licence, or operate under another financial advice provider’s full licence. For more information about these options, see the Explore your options tool.
After the two year period the transitional competency regime (also known as the competency safe harbour) also comes to an end, and you must meet the competency requirements under the new Code of Professional Conduct.
Costs
A transitional licence will cost $465.75 (incl GST), plus $44.56 (incl GST) for any authorised body named on your application.
The cost of a full licence and ongoing annual levies will vary based on how you choose to operate in the new regime.
For more info see the MBIE website.
Ongoing obligations
All financial advice providers will be regulated under the Financial Markets Conduct Act 2013 (FMC Act), as amended by the Financial Services Legislation Amendment Act 2019 (FSLAA) and will need to meet certain duties and obligations. Most of these duties apply to everyone giving advice, but there are a few additional duties for licensed financial advice providers, particularly providers who engage others to give advice on their behalf.
Duties
If you give financial advice to retail clients, you must:
- Take reasonable steps to ensure your clients understand the nature and scope of the advice being provided, including any limitations about that. For example, you must explain if you’re only able to give advice about certain products.
- Where there’s a conflict of interest you must give priority to your client’s interests.
- At all times exercise care, diligence and skill.
- Comply with the new Code of Professional Conduct for financial advice services including competence, knowledge and skill requirements as well as requirements for ethical behaviour, conduct and client care.
- Only recommend financial products to clients that are offered in compliance with the FMC Act and its regulations.
- Ensure you follow the new disclosure regulations and that any information you make available to clients is not false, misleading or incomplete.
As a financial advice provider, you must also:
- Make sure anyone you engage to give advice under your licence complies with all the duties listed above.
- Have appropriate processes and controls in place when you engage nominated representatives. These should allow you to control the advice being given and the circumstances in which it is given.
- If you engage nominated representatives, ensure that you do not give, or offer to give, any inappropriate incentives.
- Tell the FMA if you materially contravene your obligations and must also let us know if you change the legal structure of your businesses or make certain other changes, such as changes in directors or senior people.
- Comply with any licence conditions we may include when granting your licence, including the standard conditions, and the licence conditions imposed by law.
Standard conditions
From the start of the new regime in early 2021, all transitional licence-holders and authorised bodies will need to comply with the transitional licence standard conditions. They include conditions imposed by the FMC Act, the regulations, and any conditions imposed by FMA.
1. Record Keeping
You must create in a timely manner and maintain adequate records in relation to your financial advice service.
- Your records must be kept in a manner that ensures the integrity of the information and enables it to be conveniently inspected and reviewed by us. This may be electronic.
- Your records may be in any language providing you create and keep an accurate summary of the record in English and, if required by us, provide a full translation of the record into English by a translator approved by us
- Your records must be available for inspection by us at all reasonable times and must be kept for at least 7 years from
- The date the record is made; and
- The date the financial advice to which the record relates is given; and
- The date any later record is made that refers to or relies on information in the record.
2. Internal complaints process
You must have an internal process for resolving client complaints relating to your financial advice service that provides for:
- Complaints to be dealt with in a fair, timely and transparent manner.
- Records to be kept of all complaints and any actions taken in relation to them including the dates on which each complaint was received and any action was taken in relation to that complaint.
Read more about Standard conditions for transitional Financial Advice Provider licences
General reporting condition
If any of the following occurs, the licensee or an authorised body must, as soon as practicable, send a report containing details of the matter to the FMA:
- The licensee or authorised body is, or it is likely that either will become, subject to an insolvency event, or a director or senior manager of the licensee or any key personnel of an authorised body is adjudicated, or is likely to be adjudicated bankrupt (whether in New Zealand or overseas).
- The licensee or an authorised body becomes aware that a relevant proceeding or action has been commenced or taken against the licensee, an authorised body, a director or senior manager of the licensee, or any of the key personnel of an authorised body.
- A director or senior manager of the licensee or any key personnel of an authorised body resigns, is removed or otherwise ceases to hold the office or position, or is appointed, employed or engaged.
- An auditor of the licensee or an authorised body resigns or otherwise ceases to hold office or is appointed (other than by way of reappointment).
- The licensee or an authorised body proposes to change its name or its legal structure.
- The licensee or an authorised body proposes to enter into a major transaction.
- The licensee or an authorised body becomes aware that a transaction or an arrangement has been entered into or is likely that a transaction or arrangement will be entered into that will result or has resulted in a person obtaining or losing control of the licensee or the authorised body.
Code of professional conduct
Anyone giving advice to retail clients is subject to a new Code of Professional Conduct for financial advice services. This outlines the standards of conduct, client care, competence, knowledge, and skill you need to meet when giving regulated financial advice to retail clients in New Zealand. The Minister of Commerce and Consumer Affairs approved the Code of Conduct in May 2019. It takes effect from the start of the new regime in early 2021.
A person who gives financial advice must:
Part 1: Ethical behaviour, conduct and client care
1. Treat clients fairly
2. Act with integrity
3. Give financial advice that is suitable
4. Ensure the client understands the financial advice
5. Protect client information
Part 2: Competence, knowledge and skill
6. Have general competence, knowledge and skill
7. Have particular competence, knowledge, and skill for designing an investment plan
8. Have particular competence, knowledge and skill for product advice
9. Keep competence, knowledge, and skill up-to-date
Download the full Code of Professional Conduct PDF
Competency safe harbour
Under the transitional arrangements in the Act, 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 Adviser Act 2008 regime, 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 Adviser Act 2008. Note that this competency safe harbour expires at the end of the transitional licensing period, two years after the new financial advice regime begins.
Disclosure
You must disclose certain information to your clients to ensure they can make informed decisions.
You can view information about the disclosure regulations on MBIE’s website.
Liability and enforcement
The FMA is one of several organisations that has a role in enforcing the new financial advice regime.
For an overview of what this will mean, see the MBIE fact sheets:
What you can do now
The new financial advice regime comes into effect in early 2021. Use this checklist to help you get ready as a financial advice provider:
- If you haven’t yet decided how you want to operate in the new regime, you may find our Explore your options tool helpful.
- Make sure that the individual or entity that will hold the Financial Advice Provider licence is registered correctly on the FSPR.
- Start a conversation with any financial advisers or authorised bodies you intend to engage as a financial advice provider and make sure they’re also registered correctly on the FSPR.
- Apply for your transitional licence.
- Learn about your duties and obligations under the new regime, and our approach to liability and enforcement.
- Read the new Code of Professional Conduct to find out what competence, knowledge and skills you need under the new regime.
- Plan how to meet any skills or knowledge gaps, and understand how the competency safe harbour might apply to you and any financial advisers or authorised bodies you engage.
Frequently asked questions for FAP
Registration
Q: Why can’t I see my company’s registration when I search for it on the FSPR?
A: Companies that have been registered on the FSPR only become visible on the register once they are offering an active service.
If the only financial service you have selected on the FSPR is a transitional licence service (ie “Licensed Provider – Transitional Licence” or “Authorised Body – Transitional Licence”), then your company's registration will only become publicly visible on the FSPR from the start of the new financial advice regime on 15 March 2021.
If you need to update or amend your company’s FSPR details in the meantime, you can still login to the FSPR to do that – unless your request relates to de-registering from the “Transitional Licence” service (see the FAQ below).
Visit the FSPR website for more info.
Q: I’m a financial adviser currently operating as a sole trader and want to continue to operate in a similar way in the new regime. I registered myself, personally, for the “Licensed Provider – Transitional Licence” service on the FSPR. However, I now want to apply for a transitional licence in my company’s name instead. How do I change this?
A: If you have already indicated your intention to register for a transitional licence in your own name, then you will have to apply to have this withdrawn. Please email licensing@fma.govt.nz to request this. You will then need to apply for a transitional licence in your company’s name.
See Registering Correctly on the FSPR for more info.
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