New Zealand Certificate in Financial Services Level 5, and transitioning to the new regime.
Why you should think about level 5 qualification early
If you and your advisers have all completed either the ‘old’ National Certificate or the ‘new’ New Zealand Certificate, then your issue is one of ensuring knowledge and competence is maintained.
If however, you are uncertain about whether to start, or finish, level 5 training, then now is the time to make that decision. While the regulatory minimum education requirements for all advisers will not be known for certain until the Code Working Group’s proposals are public (and finalised), every indication is that Level 5 will be the minimum benchmark.
It makes good sense to start working towards that now. Human nature has many of us leaving things to the last minute as we feel we can work better under pressure and tight deadlines. However doing this could cost you and your business dearly. The reasons for this are:
- Transitioning to the new regime will impact upon your revenue generation: Mid-2018 onwards will be a very busy time for financial advisers as they digest the new legislation, regulation and code and prepare to move into FMCA. In many firms, new compliance processes and templates will need to be adopted plus financial advisers will need to identify what financial advice provider (FAP) they wish to operate under. Advisers will be busy with these changes plus continuing to make a living and if they are only starting their Level 5 study at that point, then it is likely revenue generation will suffer.
- Advisers need to make themselves attractive to FAPs: From about August 2018, those firms applying for a transitional FAP licence will be assessing who they are prepared to accept under their licence. Logically, they will only want to take on board qualified and low-risk advisers who are high revenue earners and who have already demonstrated a willingness to upskill and become compliant. No potential licence holder would want to recruit slow adopters and unwilling compliers. These sorts of people are too big a compliance risk and will take too much time in the transition process. As an adviser, make yourself more attractive to potential FAPs by completing Level 5. If you are also a business owner who will have advisers working under your licence, ensure you can demonstrate your advisers’ capability, likely to be a key licence requirement for FAPs.
- Potentially declining revenues and increasing costs: Consumerism and regulation are driving greater transparency of fees. It is likely clients will demand greater value for money plus some commission structures may decrease or even disappear altogether. Combine this with financial advisory firms merging to gain greater market penetration and brand recognition, and it becomes likely that the current good days of high margins may come under threat. Additionally, the cost of doing business will rise with the inevitable rise in compliance costs as you move into the more regulated FMCA regime. Therefore, it may be more prudent to incur expenditure on the level 5 qualification now, while you/your business is not burdened with one off transition costs and higher operating costs at the same time as potentially lower gross revenue.
- Level 5 is a big piece of work: Obtaining the New Zealand Certificate in Financial Services Level 5 requires students to complete the Core Strand and at least one specialty strand, to obtain a minimum of 60 NZQA credits. This is a big body of work and would logically take six months for someone who is also working full time and does not want the study to impact upon their revenue generating ability.
- Financial advisers will have more study in 2018: It is also likely that those who will be actively involved in providing financial advice will need to complete the Financial Advice Strand which is a further 30 NZQA credits. Strategi recommends you hold off doing the Financial Advice Strand until mid-2018 when the Code Working Group will be getting close to finalising their recommendations. Content for the Financial Advice Strand will likely change to reflect the new financial adviser code and legislation/regulation so waiting is prudent.