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Authorised Body (AB) vs FAP licensee - What’s the difference?

Warwick Slow

27/05/2024

Since the Financial Services Legislation Amendment Act (FSLAA) kicked off in March 2021, there has been a lot of industry noise surrounding licensing structures and what they could mean for your business.

A key topic of debate is deciding whether to operate as an Authorised Body (AB) or obtain a Financial Advice Provider (FAP) licence.

The right licensing structure depends on your business needs. In this article, we will explore the two main licensing structures that small to medium financial advice businesses in New Zealand are likely to consider.

So which one is best for you and your business? Let's look at the common questions and myths that surround both structures.

If I’m an Authorised Body under an aggregator’s FAP licence, does that mean I don’t have to do compliance?

In short, no. You have the same regulatory obligations as a FAP licence holder. 

Authorised Bodies are required to have the same governance controls in place and are held to the same standards as a FAP licensee. 

Is applying for a FAP licence expensive?

The licence application costs roughly $900 and is a one-off cost. You will need to pay your FSPR renewal costs each year which is roughly the same whether you’re an AB or a full licence holder.

If you’re registering a new business on the FSPR there is a charge of around $1,000. You will not need to pay this if your business entity is already registered.

How long does the full licence process take? 

The full licence application usually takes around 30 minutes to complete and between 1-3 weeks for a response back from the FMA. The official quoted time frame says 60 working days, however, that appears to be a worst-case scenario.

Members of the Kiwi Adviser Network (KAN) will have support from our compliance team for the application process at no additional cost.

What other work is involved up front?

To be ready to apply for your licence, you will need to have met the key licensing requirements.

In the FAP licence application, it will ask you when you last reviewed these key policies (e.g Complaints Handling Policy) and what date you will review them next.

Members of KAN will have access to our standard policies and processes that can be adjusted to best fit your business. This is at no additional cost and our compliance team will work with you to create a compliance assurance plan (CAP) that is the right fit for your business.

Myth #1: Being an AB is safer due to the licence holder taking the risk

This isn’t exactly true. In an AB model, the liability is shared between the licence holder and the AB. 

This means that the licence holder must be held accountable for maintaining compliance for all ABs under their licence. 

A consequence means that as the number of ABs under a FAP licence increases, so does the risk. When risk increases, so do controls and processes to mitigate the additional risk. This could mean rigidity and extra steps to comply with the licence holder.

Myth #2: ABs do not get included in FMA monitoring visits

This isn’t the case and depending on the size of the FAP that the AB is part of, they may be selected to be included as part of a monitoring visit.

Myth #3: As an AB, my compliance is just sorted

Your FAP licensee will give you the framework to be compliant, however, you still need to do the work. 

At KAN, the team provides support to the members' businesses, regardless of their licensing structure to make sure they’ve got a compliance plan that fits the unique needs of their business.

What next?

Navigating the differences between being an Authorised Body (AB) and a FAP licence can be complex. Both structures have similar compliance obligations and it is worth understanding these whether you are an AB or FAP licence holder.

We hope this clears up some misconceptions about the differences and what each structure entails.

Ultimately there is no one-size-fits-all solution, so it's important to get tailored advice to determine the best structure for your business.

For more on what a Financial Advice Provider is, click here.

Since the Financial Services Legislation Amendment Act (FSLAA) kicked off in March 2021, there has been a lot of industry noise surrounding licensing structures and what they could mean for your business.

A key topic of debate is deciding whether to operate as an Authorised Body (AB) or obtain a Financial Advice Provider (FAP) licence.

The right licensing structure depends on your business needs. In this article, we will explore the two main licensing structures that small to medium financial advice businesses in New Zealand are likely to consider.

So which one is best for you and your business? Let's look at the common questions and myths that surround both structures.

If I’m an Authorised Body under an aggregator’s FAP licence, does that mean I don’t have to do compliance?

In short, no. You have the same regulatory obligations as a FAP licence holder. 

Authorised Bodies are required to have the same governance controls in place and are held to the same standards as a FAP licensee. 

Is applying for a FAP licence expensive?

The licence application costs roughly $900 and is a one-off cost. You will need to pay your FSPR renewal costs each year which is roughly the same whether you’re an AB or a full licence holder.

If you’re registering a new business on the FSPR there is a charge of around $1,000. You will not need to pay this if your business entity is already registered.

How long does the full licence process take? 

The full licence application usually takes around 30 minutes to complete and between 1-3 weeks for a response back from the FMA. The official quoted time frame says 60 working days, however, that appears to be a worst-case scenario.

Members of the Kiwi Adviser Network (KAN) will have support from our compliance team for the application process at no additional cost.

What other work is involved up front?

To be ready to apply for your licence, you will need to have met the key licensing requirements.

In the FAP licence application, it will ask you when you last reviewed these key policies (e.g Complaints Handling Policy) and what date you will review them next.

Members of KAN will have access to our standard policies and processes that can be adjusted to best fit your business. This is at no additional cost and our compliance team will work with you to create a compliance assurance plan (CAP) that is the right fit for your business.

Myth #1: Being an AB is safer due to the licence holder taking the risk

This isn’t exactly true. In an AB model, the liability is shared between the licence holder and the AB. 

This means that the licence holder must be held accountable for maintaining compliance for all ABs under their licence. 

A consequence means that as the number of ABs under a FAP licence increases, so does the risk. When risk increases, so do controls and processes to mitigate the additional risk. This could mean rigidity and extra steps to comply with the licence holder.

Myth #2: ABs do not get included in FMA monitoring visits

This isn’t the case and depending on the size of the FAP that the AB is part of, they may be selected to be included as part of a monitoring visit.

Myth #3: As an AB, my compliance is just sorted

Your FAP licensee will give you the framework to be compliant, however, you still need to do the work. 

At KAN, the team provides support to the members' businesses, regardless of their licensing structure to make sure they’ve got a compliance plan that fits the unique needs of their business.

What next?

Navigating the differences between being an Authorised Body (AB) and a FAP licence can be complex. Both structures have similar compliance obligations and it is worth understanding these whether you are an AB or FAP licence holder.

We hope this clears up some misconceptions about the differences and what each structure entails.

Ultimately there is no one-size-fits-all solution, so it's important to get tailored advice to determine the best structure for your business.

For more on what a Financial Advice Provider is, click here.

Since the Financial Services Legislation Amendment Act (FSLAA) kicked off in March 2021, there has been a lot of industry noise surrounding licensing structures and what they could mean for your business.

A key topic of debate is deciding whether to operate as an Authorised Body (AB) or obtain a Financial Advice Provider (FAP) licence.

The right licensing structure depends on your business needs. In this article, we will explore the two main licensing structures that small to medium financial advice businesses in New Zealand are likely to consider.

So which one is best for you and your business? Let's look at the common questions and myths that surround both structures.

If I’m an Authorised Body under an aggregator’s FAP licence, does that mean I don’t have to do compliance?

In short, no. You have the same regulatory obligations as a FAP licence holder. 

Authorised Bodies are required to have the same governance controls in place and are held to the same standards as a FAP licensee. 

Is applying for a FAP licence expensive?

The licence application costs roughly $900 and is a one-off cost. You will need to pay your FSPR renewal costs each year which is roughly the same whether you’re an AB or a full licence holder.

If you’re registering a new business on the FSPR there is a charge of around $1,000. You will not need to pay this if your business entity is already registered.

How long does the full licence process take? 

The full licence application usually takes around 30 minutes to complete and between 1-3 weeks for a response back from the FMA. The official quoted time frame says 60 working days, however, that appears to be a worst-case scenario.

Members of the Kiwi Adviser Network (KAN) will have support from our compliance team for the application process at no additional cost.

What other work is involved up front?

To be ready to apply for your licence, you will need to have met the key licensing requirements.

In the FAP licence application, it will ask you when you last reviewed these key policies (e.g Complaints Handling Policy) and what date you will review them next.

Members of KAN will have access to our standard policies and processes that can be adjusted to best fit your business. This is at no additional cost and our compliance team will work with you to create a compliance assurance plan (CAP) that is the right fit for your business.

Myth #1: Being an AB is safer due to the licence holder taking the risk

This isn’t exactly true. In an AB model, the liability is shared between the licence holder and the AB. 

This means that the licence holder must be held accountable for maintaining compliance for all ABs under their licence. 

A consequence means that as the number of ABs under a FAP licence increases, so does the risk. When risk increases, so do controls and processes to mitigate the additional risk. This could mean rigidity and extra steps to comply with the licence holder.

Myth #2: ABs do not get included in FMA monitoring visits

This isn’t the case and depending on the size of the FAP that the AB is part of, they may be selected to be included as part of a monitoring visit.

Myth #3: As an AB, my compliance is just sorted

Your FAP licensee will give you the framework to be compliant, however, you still need to do the work. 

At KAN, the team provides support to the members' businesses, regardless of their licensing structure to make sure they’ve got a compliance plan that fits the unique needs of their business.

What next?

Navigating the differences between being an Authorised Body (AB) and a FAP licence can be complex. Both structures have similar compliance obligations and it is worth understanding these whether you are an AB or FAP licence holder.

We hope this clears up some misconceptions about the differences and what each structure entails.

Ultimately there is no one-size-fits-all solution, so it's important to get tailored advice to determine the best structure for your business.

For more on what a Financial Advice Provider is, click here.