What the FAP landscape looks like now

I think the findings of: 1.There are fewer complaints to FAPs, and 2.Although higher complaints to DRS, less are upheld, Would indicate that not only are the large industry suppliers getting their act together, but the quality of service from Financial Advisers is probably higher than it has ever been. I think that FSLAA and COFI are having the desired effect. IMO we have driven a lot of the cowboys out of the industry and after taking a hit in adviser numbers initially, we are bouncing back with a better crop of adviser now. P.S. I know that not all that left the industry during the legislation changes were cowboys. Some just decided it was a good time to retire.

“Most FAPs engaged 19 or fewer advisers and the most common business structure was a single-adviser FAP. About half of all FAPs only had one adviser and 78 had none, which the FMA said could indicate they were operating as individuals giving advice or via digital advice. Only three had more than 500 advisers.” Buoyed by the fact that we have so many smaller and single adviser FAPs operating within the industry currently. Many experienced advisers have clearly leapt at the opportunity to be independent licenced advice businesses and good on them. Perhaps the FMA can explain to mortgage advisers then why the banks have been allowed to collude with the aggregators/head groups into forcing mortgage advice businesses with their own FAP to belong to an aggregator whose FAP licence they do not provide advice under. Aggregators currently hold a monopoly over all mortgage advisers’ access to the various lenders who have essentially been treated like authorised bodies which advisers with their own FAP licence most certainly are not. We have this ridiculous title now which has emerged from the banks themselves of “Master FAP” to describe the various aggregators which has no legal relevancy to the financial advisers Act. Aggregators are simply Class 2 FAP licence holders which many larger mortgage advice businesses or one-man bands looking to expand one day already are themselves. Insurance advisers with their own FAP licence don’t need to belong to an aggregator to deal with the insurers. From all accounts this model works very well for both the provider and adviser. The same needs to also apply now to the mortgage advice industry. When you are a business owner who has been licenced by the FMA to provide financial advice in your own name the fact that you are still being forced to belong to a third-party business (which has no responsibility over the advice you provide) then there is something seriously amiss. The mortgage adviser industry in New Zealand has been disadvantaged because of the aggregator model which has been focused on cementing aggregator’s own businesses not on the banks offering advisers a fair service standard for our customers. Mortgage advisers holding their own FAP licences need to be dealing directly with the banks and cutting out the middleman aka aggregators. The FMA cannot say this is a commercial decision by the banks as that excuse clearly doesn’t hold water. Given the distinct lack of complaints been upheld against FAPs and the fact that there are so many smaller and single adviser FAPs operating within the industry the current status quo for the mortgage adviser industry urgently needs addressing. If the FMA cannot see the systemic problem of forcing a FAP licence holder to belong to another FAP just so they can access the various providers, then it’s time our politicians in Wellington were made aware of this licensing discrepancy.

Yes unfortunately any mortgage business that has their own FAP are still having to go through regulation twice , once for their own FAP license and then again they’re forced under their aggregation groups FAP license , I just heard from a colleague one large dealer group just increased its member fees for FAP license holders only , but would lower the fee if they go under the group license, also stating banks and regulators want all advisers under one FAP only ! I’m sure the FMA does not want this.

So, if complaints have dropped and it looks like for mortgage advisers there are hardly any confirms there is minimal risk for the mortgage advise industry, so why are PI cover premiums not dropping in cost.? But are instead increasing. Dealer group PI cover schemes are the most expensive, why? Because the group’s profit from these schemes and it’s in their best interests that premiums are the highest they can be, just another income source that dealer groups extract out of their members, the FMA does not enforce compulsory PI cover, but dealer groups and banks do. (Pattern here?)