• What will it cost to be an adviser?

There is a new regime for financial advisers on the way and the Ministry of Business, Innovation and Employment (MBIE) has released a discussion paper on future fees and levies.

Minister Kris Faafoi says it is inevitable that regulation imposes costs.  Compliance costs will include a licensing fee to FMA and an annual FMA levy.  The Minister acknowledged he has “heard concerns about how the costs of the regime will affect smaller advice practices.” He wants to ensure costs are appropriate for those practices.

 

FMA licencing fees

In future advisers need to work for a financial advice provider (FAP).  This entity will have to apply for a transitional licence in 2019 and then a full licence within two years.  MBIE suggest the transitional licence will be relatively straightforward and a base $363 fee will apply to all FAPs.

Full licensing however is however more complex depending on the structure of the business and whether the advisers are financial advisers and/or nominated representatives.    

 

  • A FAP that is a single adviser business giving advice on its own account will pay $575 plus $155/hour if processing time exceeds 2 hours
  • FAPs that engage multiple financial advisers but no nominated representatives would pay $730 plus $155/hour if processing exceeds 3 hours
  • FAPs engaging nominated representatives would pay $885 plus $155/hour if processing exceeds 4 hours  

 

Additional charges apply for all licencing where there is more than one authorised body on an application or late variations are requested.  At this stage they are not proposing a separate renewal fee; the FMA is currently consulting on removing expiry dates from all licences under the FMC Act.

 

FMA Levies

Unlike licence fees, levies are not set on a purely cost recovery basis, rather it relates to the benefit each participant gets from operating in a well regulated environment.

MBIEs preferred option is for a levy to comprise of a base amount applying to all financial advisers and FAPs.  There would be an additional amount for an FAP if they give advice on their own account and for each nominated representative they engage.

As with the current model a standard financial service provider levy of $460 will apply on initial FSPR registration with a service specific levy applying on the financial service provider’s FSPR annual confirmation.

 

  • At initial registration – FAP or financial adviser   $460
  • At annual confirmation
  • FAP  -   $230 plus the following (capped at $80K):
    • $179 per nominated representative
    • $1,106 for giving advice on own account
  • Financial adviser  -   $267

 

A possible option for levies is a tired approach, however MBIE is concerned this would inhibit growth when an entity reached the top of a tier and there was a significant increase to the next level.  Relief for single adviser businesses is also being considered. 

Comparing levies to the current arrangements, an RFA in a single adviser business pays $460 in future that would be $497. An FAP with five RFAs reduces from $2,760 to $1,565.  An FAP currently with 100 QFE advisers increases from $460 to $18,130.

 



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