12 April 2022

Licensing – hurdle or an opportunity?

Speaking notes from a presentation by FMA Director of Market Engagement and Acting Director of Regulation John Botica to a webinar audience of Financial Advice Providers and financial advisers, organised by the Strategi Group on April 07, 2022.

This is such a great industry. Financial Advice is just so important. We’ve all read the surveys that tell us for whatever reason NZ’ers have low levels of engagement with financial advice. 

But what I’m starting to see is a growing awareness that quality, regulated advice is worth taking. And by quality advice, I see that as being appropriate advice that suits the clients’ needs.

Regulated is about setting standards and ultimately controlling behaviour. We need to be able to trust and value advice. We need to be able to trust and value the person giving that advice. So, to the question: hurdle or opportunity?

I’d like to answer the question in two parts.

Firstly, the value of regulation and trust from a consumer’s perspective.

Much of that trust comes by having a well-regulated industry, with standards, like a code of conduct, licensing, and qualifications (which we call competency). 

We can now tick that box – that’s what FSLAA is about.

I’ve long held the view that consumers should be able to trust regulation.  This is where the FMA comes into play.

What I’d like to see are consumers being confident to say and believe:

“I know financial advice providers have been vetted by the FMA”

 – that’s called licensing.

“I know I have somewhere to go if things go wrong. I have that sense of protection.”

“I can be confident the person I’m dealing with is qualified”. 

That’s called regulation.  And that’s not a hurdle, it’s an opportunity.

Secondly, the adviser’s view.

Yes, there’s work to do, but there’s value.

Many advisers are telling us about the value of having robust processes and procedures in place. A recent conversation with an adviser that struck a chord for me, who proudly said:

“I found preparing for my licence broadened my skills and caused me to become more knowledgeable.”

Another commented:

“It’s helped me to react and respond to short-term disruptions much better and more confidently than before.

My approach is now more disciplined, and now I’m finding I have more time to spend with my clients”.

From someone with other advisers working for their firm:

“Keeping a keener eye on governance and compliance reduces risk.

It gives my firm authority and prestige”.

I think that last quote really sums up what it means to be a professional.

So, I think it’s both a hurdle and an opportunity, where the downstream reward is in owning a business that has purposely built a solid foundation for meeting the many challenges of the future.

Yes, there are licensing requirements to be met first. You must put the work in, and there are increased compliance costs. That’s undeniable.

But in rising to the challenge of meeting the licensing requirements, you are making it possible to transform your business into a future ready state.

It’s also an opportunity to consider a business structure that works for you, to address certain risks in your business, and to make improvements towards being a more effective and efficiently run business.

The new regime set out to remove those barriers that make it difficult for consumers to access quality advice. The elimination of those barriers is the greatest opportunity of all. That’s because it’s a shared opportunity: as more consumers feel confident to seek out and experience quality advice and see the benefit, in turn your business grows and flourishes.

And above that’s what builds enterprise value.

So for me, the balance definitely tips well in favour of opportunity.