LICENSING

Becoming your own FAP may be a cost effective solution.

There is a great deal of misinformation in the marketplace around how difficult and expensive it will be for a small 1-3 adviser business to become a financial advice provider (FAP). It certainly will not be a walk in the park but for most of our member firms, obtaining a FAP licence will be achievable. You will make it easier on yourself if you have obtained sooner rather than later the New Zealand Certificate in Financial Services Level 5 (NZCFS5) plus you have documented your processes.

We have worked with Strategi to obtain estimates of what it might cost for you to become a FAP. The great news it is much less than what many have been indicating it would cost.

FMA licensing for FAPs will be proportionate to the business size and is unlikely it will expect a 1-3 person business to have the same high level of documented policies, procedures and systems in place as a large multi-adviser operation. If the FAP was large with dozens of advisers, then there will be increased focus on the systems, processes and policies. If the business is very small, then the focus will be on the individual adviser(s) who own and operate the FAP. With small businesses, there will be an expectation that the individuals have attained the New Zealand Certificate in Financial Services Level 5, and have a robust professional development plan in place. With this in mind, it is important to enrol with Strategi Institute and complete the level 5 qualification as soon as possible.

Estimated cost to become a FAP

ItemEstimated cost
Strategi fee for provision of a licence application template plus all supporting documents required for a 1-3 adviser FAP.$3,000
Possible consulting fee if the member wanted Strategi to review their FAP licence application prior to submission. Fee would vary with how much work Strategi needed to do. Likely range is $400-$1,000. We have used $1,000 to give the likely upper level.$1,000
FMA licence application cost.*$1,172
Owner’s time to complete the application and customise the supporting policies and procedures. This is estimated to be 10 hr at $200/hr.$2,000
Total estimated cost excl. GST$7,172

* This figure is based on the licence fees published by the FMA. Please note, these fees may change depending upon the time taken to assess your application, and the number of authorised bodies in the application. This fee includes the cost of the transitional licence application fee and the full licence application fee for a business or individual with financial advisers.
All costs are estimates only and exclude GST.

Estimated cost to maintain a FAP

Below are examples based on a single adviser FAP and a two adviser FAP. There are also variations based on the compliance solution each FAP decided to adopt.

Strategi can provide two different compliance solutions:

  1. My virtual compliance officer: This is ideal for a firm which wants to contract out most of its day-to-day compliance functions as the existing PA/Secretary does not have the time or training to undertake these functions. Under this arrangement, Strategi provides, on a continuous basis, the day-to-day compliance functions. Annual pricing for this is: $3,900 for the first adviser, $3,600 for the second adviser and $3,300 for the third adviser in the same FAP business (all pricing excluding GST).
  2. Navigator Enterprise and Navigator Essentials annual review: Together, this is an end-to- end compliance review that is undertaken annually and looks at all aspects of your business. It also provides an ongoing help desk. This is ideal for those adviser firms which have a PA/secretary who will do the day-to-day compliance, while Strategi undertakes the external compliance review. For the first adviser in each FAP business, they would use the Navigator Enterprise solution costing $1,872 pa. For the second adviser in the same FAP business, they would use the Navigator Essentials solution costing $1,284 per annum.

Example 1: Single adviser FAP

ItemMy virtual compliance officer solutionAnnual compliance review solution
Compliance fee for one adviser.$3,900$1,872
Annual FMA levy fee and FSPR annual confirmation fee.*$640$640
Total estimated annual cost excl. GST$4,540$2,512

* This figure is based on the fees published by the FMA and are assuming your business is the FAP and you are a financial adviser providing advice on your business's behalf.
All costs are estimates only and exclude GST.

Example2: Two adviser FAP

ItemMy virtual compliance officer solutionAnnual compliance review solution
Compliance fee for two advisers in the same FAP.$7,500$3,156
Annual FMA levy fee and FSPR annual confirmation fee.*$980$980
Total estimated annual cost excl. GST$8,480$4,136

* This figure is based on the fees published by the FMA and assume both advisers are financial advisers.
All costs are estimates only and exclude GST.

All compliance package fees exclude the Radar online CPD portal which retails at $350 plus GST pa. Radar is available to all TripleA advisers at a discounted rate.

To help guide advisers through the decision making process, Strategi Group has launched the FAP toolkit.

This is a series of helpful guides designed to assist financial advisers as they transition to the new regulatory regime. The first in the series is titled ‘Helping you step up to your FAP obligations’. It provides:

  • A transition timeline along with helpful decision points.
  • A matrix containing the three choices confronting all financial advisers: (1) plan to exit, (2) join a FAP, or (3) own a FAP.
  • A series of action points relating to each of the three choices.

Download a copy and start the decision making process. For more information, contact Strategi: info@strategi.co.nz or (09) 414 1300