Who needs to comply
Authorised Financial Advisers (AFAs) are individual advisers who are permitted to provide personalised financial adviser services to retail clients, for category 1 and category 2 products, depending on the scope of their licence. They can also provide class services and wholesale services. Category 1 and 2 products are described in s5 of the Financial Advisers Act 2008.
You need to become an AFA if you provide any of the following financial adviser services to retail clients:
- give personalised financial advice on category 1 products. See . Financial advice covers any recommendation or opinion about buying, selling (or refraining from buying or selling) a financial product
- provide a personalised discretionary investment management service (DIMS).
- provide an investment planning service, that is, if you design or offer to design a plan for an individual that:
- is based on an analysis of an individual's current and future overall financial situation
- identifies their investment needs and goals, and
- includes recommendations or opinions to realise those goals.
The focus is on the nature of the service, rather than the product recommendations. A service that identifies the financial situation and goals of a group of people the individual belongs to can also be an investment planning service.
You do not need to be authorised if:
- you only give financial advice for category 2 products.
- you only provide a financial adviser service to wholesale clients. See section 5C and D of the Financial Advisers Act 2008 for the full definition of wholesale clients.
- you only provide a class service to retail clients, e.g. generic product brochures and online resources. These services target a wide class of people rather than being specifically tailored to meet an individual's needs or situation.
- you only provide a financial service which is incidental to another non-financial service, e.g. a sales assistant advising a customer on a hire purchase contract.
- you are a member of certain professions providing a relevant financial service in the ordinary course of your professional business. This exemption applies to chartered accountants, lawyers, real estate agents and others.
- you are a not-for-profit organisation providing a relevant financial service without charge.
- you are an employer providing a relevant service to an employee in connection with a financial product made available through the workplace.
For a complete list of exemptions see s13 and s14 of the Act.
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