Once full licensing begins, adviser businesses will be categorised into three separate classes – and, according to the FMA, it will be vital for advisers to ensure they are applying for the correct class.
Michael Hewes, supervision manager at the FMA says the different classes are the result of ongoing collaboration with the adviser sector, and they aim to tailor the process as much as possible to each business.
Businesses will be categorised into either Class 1, 2 or 3, according to the number of advisers, representatives and bodies within the firm.
“The license classes are very much unique to the FMA, and it’s the first time we’ve actually offered various classes of license – and that really reflects on how much we’ve engaged and talked to the advisers over the past five years,” Hewes said.
“One thing we’ve heard often is ‘make sure you make the licensing process relevant to me and my business,’ so that’s what we’ve tried to do.”
“With a Class 1 license, the holder can provide regulated financial advice to retail clients on their own account through a sole adviser practice,” he explained.
“Essentially, if you’re providing your insurance, investment or mortgage advice and you’re working as a sole entity – you’re a Class 1.
“If you wanted to engage other people, then you’d move up to a Class 2 – that is your class as soon as you have a second adviser in the business. If you potentially wanted to have nominated representatives of associated bodies under your structure, then you’d move through to a Class 3.”
Hewes says an example of a Class 3 license holder would be a larger financial institution or brokerage, with a large number of advisers under its license. He says there are some exceptions that apply across classes – for example, a sole adviser who is unable to work due to injury or sickness can still hire a temporary replacement to take care of clients while they are away.
“Our guide has really good explanations of each of the classes, and we’ve put them into layman’s terms – so I’d really advise having a read through that,” Hewes said.
“Another reason we’ve thought about classes is if you’re the owner of the business and the sole person working in it, you get a much shorter set of questions. They’re designed to be relevant to how your business runs.”
