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.
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.
When you engage a financial adviser under your licence, you must record details of the engagement on the Financial Service Providers Register (FSPR).
You’ll need to do this within three months, or the financial adviser may be deregistered if they offer no other services.
Remember that you may need to link to yourself on the FSPR if your company will engage you, personally, as a financial adviser under its licence.
Watch the short video below to see how to link to a financial adviser on the FSPR or visit the Companies Office website for more information.
The cost of a full licence and the FMA levy (payable at annual confirmation) will vary based on how you choose to operate in the new regime.
You will also be charged a fee of $86.25 (incl GST) at annual confirmation.
Note that MBIE have announced an increase in FMA levies, which will be phased in over the next three years. For full details, including the increased levy amounts (exclusive of GST) that will apply from 15 March 2021, 1 July 2021 and 1 July 2022 see the MBIE website.
All financial advice providers are regulated under the Financial Markets Conduct Act 2013 (FMC Act), as amended by theFinancial Services Legislation Amendment Act 2019 (FSLAA)and 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.
Here’s a summary of the main duties that apply to everyone who gives regulated financial advice to a retail client:
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.
Only recommend financial products to clients that are offered in compliance with theFMC 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 will have additional obligations, for example:
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.
From the start of the new regime on Monday 15 March 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.
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 on Monday 15 March 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
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.
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.
Liabilities 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 means, see the MBIE fact sheets:
Q: How does a licensed financial advice provider (or authorised body) notify the FMA when they add or remove a financial adviser?
A: This important step is completed on the Financial Service Providers Register (FSPR). To see how to link to or remove an adviser from your licence, watch this short video or visit the Companies Office website for more information. The FMA will be notified of the change automatically when you update the FSPR. No separate notification to us is necessary.
Q: We want to link our FAP to a financial adviser on the FSPR - why can't we find their details?
A: : If you have followed the steps on the Companies Office website and are still unable to link to a financial adviser on the FSPR, this may be because the adviser has either applied for, or holds, a Financial Advice Provider licence in their individual name. If this is the case, they will not appear as a “Financial adviser” on the FSPR. That’s because a financial advice provider cannot also be a “Financial adviser”.
If the person concerned no longer wants to apply for or hold a FAP licence themselves, they should email firstname.lastname@example.org to discuss next steps. Once the FAP licence service is removed from their FSP registration they will be able to register as a financial adviser. Your FAP can then link to them.
Q: If I want to engage someone to provide financial advice under my licence, do they need to be an employee?
Being an employee is just one of many ways you can engage individuals to provide financial advice under your licence. How you choose to engage someone may vary based on your business structure and how you consider it most appropriate to oversee the financial advice provided on your behalf.