In short
FAIS requires a licence where a person, as a regular feature of their business, furnishes advice or renders an intermediary service about a financial product. Lending your own money to a borrower is not a financial service: it is a transaction you are party to, and a plain loan is not a financial product. What can require a licence is advising other people about where to put their money, or introducing them to somebody else's lending product. The test does not turn on whether you charge — advice given free is still advice — but it does turn on whether you do it regularly.
FAIS is the law that decides who may advise other people about financial products. It is the one piece of regulation a private lender is most likely to trip over without noticing. It does not govern lending. It governs advising — and the two get mixed up constantly, because a private lender who knows what they are doing is exactly the person others start asking for guidance.
The short answer: lending your own money is not a financial service. Introducing other people to someone else's lending product can be.
01 — What FAIS coversAdvice, and intermediary services
A person needs a licence if, as a regular feature of their business, they furnish advice or render an intermediary service. Two phrases in that sentence carry the weight.
| The phrase | What it does |
|---|---|
| As a regular feature of the business | A one-off act is not the same as carrying on the business of advising. Helping a friend once is different from building a practice on it. |
| Advice or intermediary service | Advice is a recommendation, guidance or proposal of a financial nature. An intermediary service is doing something, short of advising, that results in a client entering into a transaction in a financial product. |
The hinge: it must be about a financial product
Every limb of the definition of advice is tied to a financial product. Advice about buying one, investing in one, varying one, replacing one — or on concluding any other transaction, including a loan, aimed at acquiring a right in respect of a financial product.
That last limb is the one people miss, and it cuts both ways. A loan can bring you inside FAIS, but only where the loan is aimed at a right in a financial product. A plain loan of your own money to a borrower is not a financial product, which is why ordinary private lending sits outside FAIS entirely.
02 — The boundaryWhere private lenders actually cross it
Almost nobody in private lending sets out to give licensed advice. The crossings happen in a few recognisable ways.
- Introducing investors to a product. You know a lending platform or a fund. People ask you about it. You start introducing them, perhaps for a fee or a share. You are now rendering an intermediary service in respect of somebody else's product.
- Recommending rather than describing. Explaining how private lending works is education. Telling one person that one deal suits them is a recommendation.
- Advising on where the money comes from. Suggesting someone draw on a retirement product, surrender a policy, or move an investment in order to fund a loan is advice about those products, whatever it is about the loan.
- Doing it regularly. The regular-feature test means that an activity which was harmless as a favour changes character once it becomes part of what you do.
The fee is not the test. Advice given for nothing is still advice, and an arrangement where the product supplier pays you rather than the client does not take you outside the definition — it is closer to the definition of an intermediary service.
03 — Staying clearHow to talk about private lending without advising
This matters for anyone who writes, speaks or is asked questions about private lending, which includes most people doing it well.
| Safer | Closer to the line |
|---|---|
| Explaining how a structure works in general | Telling a named person that a structure suits them |
| Describing what a lender should look at | Assessing a person's circumstances and concluding |
| Publishing educational material to the world | Responding to an individual's situation with a proposal |
| Saying you cannot advise and referring on | Filling the gap yourself because it is easier |
The cleanest protection is to be explicit: say plainly that what you are offering is general information, that you are not licensed to advise, and that the person should take advice from someone who is. Say it before the conversation rather than in a disclaimer afterwards.
04 — The boundaryWhat this page does not decide
Whether a particular activity is advice, an intermediary service, or neither depends on what was said, to whom, about what product, and how regularly. Those are facts, and they are not knowable from a web page.
FAIS has also been amended since 2002 and the regulator is now the Financial Sector Conduct Authority rather than the Financial Services Board. Anyone who thinks they may be close to this line should ask the Authority or an attorney rather than reasoning from a summary — including this one.