LICENSING

Prioritising clarity around competence, qualifications and licensing requirements.

Impact of the Act

The Financial Services Legislation Amendment Act 2019 (Act) will impact on all TripleA members.

The Act creates the new regime for financial advice, and the main elements of the new regime are summarised below.

Who can give financial advice

Anyone giving financial advice to retail clients will need to be engaged by a financial advice provider and, the provider will need to be licensed by the Financial Markets Authority (FMA). Financial advice providers will be able to give financial advice:

  • Directly (e.g. online), and/or
  • Through ‘financial advisers’, and/or
  • Through ‘nominated representatives’ (who will have less discretion than financial advisers).

Conduct and competence requirements

All those giving financial advice (firms and individuals) will be held to conduct and competence requirements. In particular:

Anyone giving financial advice

  • Must give priority to the client’s interests
  • Must disclose certain information to clients. This will be prescribed in regulations and may vary for wholesale and retail clients.

Anyone giving financial advice to retail clients

  • Must ensure the client understands any limitations on the nature and scope of advice (e.g. how many products or providers have been considered)
  • Will be subject to a new Code of Conduct that sets standards of competence, knowledge and skill, ethical behaviour and client care.

Flexible enforcement

Financial advice providers will be subject to the compliance and enforcement tools in the Financial Markets Conduct Act 2013, such as civil liability, and licensing actions such as censure and the imposition of action plans.

All financial advisers will be subject to the existing Financial Advisers Disciplinary Committee and will face disciplinary consequences if found to have contravened a duty.

Improving access to advice

Regulatory boundaries have been removed to make it easier for those giving advice to respond to their clients’ needs and wants (e.g. the definitions of ‘class’ and ‘personalised’ financial advice are removed).

The requirement for personalised financial advice to be given by a natural person has been removed. The legislation is technology-neutral and will further enable the provision of robo (or digital) advice and help future-proof the regime.

Transitioning to the new regime for financial advice

The below provides more detail on the transitional arrangements.

On 4 November 2019
Transitional licensing opens for existing industry participants who will have approximately six months to apply for a transitional licence.

In June 2020
New financial advice regime, including Code of Conduct, comes into effect.

  • All new legislative obligations and enforcement mechanisms apply.
  • Transitional licences come into effect. To continue to provide advice, industry participants must have been granted a transitional licence by the FMA.
  • Terms such as AFA, RFA and QFE are no longer used.
  • A competency safe harbour is in place for existing industry participants who do not meet the competency requirements set out in the Code of Conduct. Under the safe harbour, existing industry participants can continue to provide advice while working to meet any new competence standards. The advice they can provide is restricted to the advice they were legally able to provide prior to the new regime coming into effect.
  • Transitionally licensed financial advice providers have up to two years to apply for, and be granted, a full licence from the FMA.

In June 2022
All financial advice providers who give regulated advice to retail clients must have obtained a full licence.

  • Any remaining transitional licences expire. Advice can no longer be provided under a transitional licence.
  • Competency safe harbour ceases. All industry participants must meet the competency requirements in the Code of Conduct to be able to provide financial advice.

Over the coming months, the FMA will work with the industry in order to help participants understand and get ready for the new financial advice regime and licensing.