COFI Licensing: Could It Be Time to Rethink Your FSP Licence?
For many financial advisers, COFI raises one important question: Will I need to apply for a new licence?
While many of the final details are still being developed, one thing is becoming increasingly clear. COFI will introduce a new approach to licensing that is likely to require many financial institutions to reassess how they are authorised and how they conduct their business.
For smaller financial services providers (FSPs), this may mean additional administrative work, governance requirements and ongoing compliance responsibilities. And for some, it may also prompt a broader question: Is it still worth maintaining my own FSP licence, or would it make more sense to operate under a larger licensed FSP?
Licensing will focus on activities, not institutions
Under the current regulatory framework, different types of financial institutions are licensed under different pieces of legislation. For example, FSPs are licensed under the Financial Advisory and Intermediary Services (FAIS) Act, while banks, insurers and other financial institutions operate under their own regulatory frameworks.
Under COFI, licensing is expected to become far more activity based.
Instead of focusing primarily on what type of business you are, the regulator will focus on what activities you perform. This means that financial institutions that appear similar today could require different licences in future if they undertake different regulated activities.
Why are smaller FSPs concerned?
Much of the industry discussion around COFI has centred around relicensing. Current indications are that existing licences are expected to transition over time rather than ending immediately. However, even with a phased approach, smaller FSPs are understandably asking what additional work will be required.
Preparing for COFI relicensing is about more than submitting another licence application. It may involve reviewing business activities, governance arrangements, oversight structures and compliance processes to ensure they align with the new conduct framework.
For businesses with limited resources, this could represent a significant administrative burden.
An alternative to managing it alone
For some advisers, COFI may simply reinforce a decision they have already been considering: Whether continuing to operate their own FSP remains the best option.
Joining a larger licensed FSP allows advisers to continue focusing on what they do best – providing financial advice – while much of the compliance, governance and regulatory administration is managed centrally. As COFI is implemented, much of the work involved in preparing for the new licensing framework and broader regulatory changes will also largely fall to the central business, reducing the administrative burden on individual advisers and smaller FSPs.
How Masthead Financial Planning can help
Masthead Financial Planning (MFP) has been actively preparing for COFI and continues to strengthen its governance, compliance and operational framework in anticipation of the new regulatory environment.
Advisers who operate under the MFP licence benefit from this ongoing investment. Rather than navigating the complexities of relicensing and broader regulatory change alone, they are supported by an experienced central team that manages licensing, governance and many of the compliance obligations associated with operating a licensed FSP.
For advisers who are concerned about the additional administrative burden that COFI may bring, including preparing for the transition to the new licensing framework, joining a larger licensed FSP such as MFP could provide an alternative to maintaining their own FSP licence. This allows advisers to focus on serving their clients while benefiting from the support, systems and expertise of an established business that is preparing for the future regulatory landscape.
Looking ahead
While there is still time before COFI is fully implemented, now is a good opportunity for advisers who operate their own FSPs to review whether their current business model remains the right fit for the future.
For some, continuing to operate their own FSP will remain the right choice. For others, the increasing regulatory burden may make joining an established licensed FSP a practical and strategic alternative.
As the regulatory landscape evolves, advisers should not only be asking what their future licence might look like, but also what business model will best support their clients, their practice and their long-term success.