New Zealand’s Financial Markets Authority (FMA) is marking the final major milestone in the new financial advice regime: the end of the transitional licensing phase. From March 17, all financial advice providers (FAPs) must hold or operate under a full licence from the FMA if they want to provide regulated financial advice to retail clients.

This follows a two-year transition period, since 15 March 2021, during which they were allowed to operate under a transitional licence.

Those requirements, brought in by the Financial Services Legislation Amendment Act (FSLAA), also include adherence to the Code of Professional Conduct for Financial Advice Services and its standards of ethical behaviour and competence, knowledge and skill. All advisers must be part of an approved disputes resolution scheme, that clients can use for free in the event of any problems.

FMA Director of Deposit Taking, Insurance and Advice, Michael Hewes, says the transitional period has been a success, with over 2,500 Financial Advice Providers either directly licensed or operating as an Authorised Body, as at 17 March 2023 – a number that includes licences issued to sole operators as well as small firms and large entities employing multiple advisers.

“The total number of advisers covered by those full licences will be known in June, once their details have been linked to each licence-holders’ registration on the Financial Service Providers Register.”

• The Class 1 licences are for sole adviser businesses.
• Class 2 licences are for businesses that engage more than one adviser .
• Class 3 licences are for large organisations that engage nominated representatives among their staff.

Mr Hewes said:

“Our focus on advice will now turn to monitoring and supervising the licensed advice providers, having finalised the questions for regulatory returns that licensees must file every year, the first due in September 2024.