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What is a Financial Advice Provider (FAP)?

Warwick Slow

20/05/2024

The term 'FAP' has been popular and frequently thrown around in the industry. Often, it is coupled with 'licensing' and 'compliance'.

So what is a FAP and what does this all mean for your licensing?

Whether you're new or have been involved for a while but are still unsure, let's clarify some of the key terms when we're talking about licensing and what they mean:

  • A ‘financial advice provider’ or FAP is likely a company that provides a financial advice service. A FAP can be a sole trader, however, this is uncommon.

  • An ‘authorised body’ or AB is an entity named on a financial advice provider’s licence that can provide the licensed service without needing its own licence. 

  • ‘Financial adviser’ means an individual (person) who is registered in relation to providing a financial advice service, but does not include a ‘financial advice provider’. 

  • A ‘nominated representative’ is an individual who is nominated to advise on a specific provider/product by a financial advice provider. Usually employees of a larger institution like a bank or a KiwiSaver provider that only provide advice on one product/business.

Why do I need to be licensed? 

From March 2021, the Financial Services Legislation Amendment Act (FSLAA) entered its transitional period for the mandate for all financial advice providers (FAPs) to be licensed to operate.

This shift introduced a new layer of complexity to the industry, prompting businesses to carefully consider their licensing options.

What are the different licensing structures?

The Financial Markets Authority (FMA) has three main licensing categories:

  1. Class One Licence: Tailored for single-adviser businesses.

  2. Class Two Licence: Designed for entities with multiple advisers or authorised body FAPs.

  3. Class Three Licence: Typically reserved for larger financial institutions with nominated representatives (a bank is an example of a class 3 licencee)

  4. Authorised Body: A business entity that sits under a FAP licence

Which structure is best for me?

Now you understand some of the key terms and structures for licensing, your next step is looking at which licensing structure is the best fit for you. The two main structures for small to medium-sized FAPs are either to hold your own licence or be an authorised body FAP under a large organisation's licence.

  • Learn more here on the difference between an AB versus operating under your own FAP licence.

The term 'FAP' has been popular and frequently thrown around in the industry. Often, it is coupled with 'licensing' and 'compliance'.

So what is a FAP and what does this all mean for your licensing?

Whether you're new or have been involved for a while but are still unsure, let's clarify some of the key terms when we're talking about licensing and what they mean:

  • A ‘financial advice provider’ or FAP is likely a company that provides a financial advice service. A FAP can be a sole trader, however, this is uncommon.

  • An ‘authorised body’ or AB is an entity named on a financial advice provider’s licence that can provide the licensed service without needing its own licence. 

  • ‘Financial adviser’ means an individual (person) who is registered in relation to providing a financial advice service, but does not include a ‘financial advice provider’. 

  • A ‘nominated representative’ is an individual who is nominated to advise on a specific provider/product by a financial advice provider. Usually employees of a larger institution like a bank or a KiwiSaver provider that only provide advice on one product/business.

Why do I need to be licensed? 

From March 2021, the Financial Services Legislation Amendment Act (FSLAA) entered its transitional period for the mandate for all financial advice providers (FAPs) to be licensed to operate.

This shift introduced a new layer of complexity to the industry, prompting businesses to carefully consider their licensing options.

What are the different licensing structures?

The Financial Markets Authority (FMA) has three main licensing categories:

  1. Class One Licence: Tailored for single-adviser businesses.

  2. Class Two Licence: Designed for entities with multiple advisers or authorised body FAPs.

  3. Class Three Licence: Typically reserved for larger financial institutions with nominated representatives (a bank is an example of a class 3 licencee)

  4. Authorised Body: A business entity that sits under a FAP licence

Which structure is best for me?

Now you understand some of the key terms and structures for licensing, your next step is looking at which licensing structure is the best fit for you. The two main structures for small to medium-sized FAPs are either to hold your own licence or be an authorised body FAP under a large organisation's licence.

  • Learn more here on the difference between an AB versus operating under your own FAP licence.

The term 'FAP' has been popular and frequently thrown around in the industry. Often, it is coupled with 'licensing' and 'compliance'.

So what is a FAP and what does this all mean for your licensing?

Whether you're new or have been involved for a while but are still unsure, let's clarify some of the key terms when we're talking about licensing and what they mean:

  • A ‘financial advice provider’ or FAP is likely a company that provides a financial advice service. A FAP can be a sole trader, however, this is uncommon.

  • An ‘authorised body’ or AB is an entity named on a financial advice provider’s licence that can provide the licensed service without needing its own licence. 

  • ‘Financial adviser’ means an individual (person) who is registered in relation to providing a financial advice service, but does not include a ‘financial advice provider’. 

  • A ‘nominated representative’ is an individual who is nominated to advise on a specific provider/product by a financial advice provider. Usually employees of a larger institution like a bank or a KiwiSaver provider that only provide advice on one product/business.

Why do I need to be licensed? 

From March 2021, the Financial Services Legislation Amendment Act (FSLAA) entered its transitional period for the mandate for all financial advice providers (FAPs) to be licensed to operate.

This shift introduced a new layer of complexity to the industry, prompting businesses to carefully consider their licensing options.

What are the different licensing structures?

The Financial Markets Authority (FMA) has three main licensing categories:

  1. Class One Licence: Tailored for single-adviser businesses.

  2. Class Two Licence: Designed for entities with multiple advisers or authorised body FAPs.

  3. Class Three Licence: Typically reserved for larger financial institutions with nominated representatives (a bank is an example of a class 3 licencee)

  4. Authorised Body: A business entity that sits under a FAP licence

Which structure is best for me?

Now you understand some of the key terms and structures for licensing, your next step is looking at which licensing structure is the best fit for you. The two main structures for small to medium-sized FAPs are either to hold your own licence or be an authorised body FAP under a large organisation's licence.

  • Learn more here on the difference between an AB versus operating under your own FAP licence.