In a recent episode of The ifa Show podcast, Iress manager practice development team, Kelli Willmer, said while the number of advisers leaving the industry had remained high in 2020, self-licensing had also emerged as an equally compelling trend.
“There are still a few stats we’re seeing in various reporting that’s coming through in the industry of advisers who are leaving or selling their businesses, but by and large I think the big news headlines that it was going to be the death of advice in this year has been exaggerated,” Ms Willmer said.
“We’re seeing a lot of advisers who are taking the opportunity and looking to get an AFSL and drive the destiny of their own business, to be masters of their own domain. They’re getting the benefits of having greater flexibility in how they’re running their own businesses going forward.”
Ms Willmer’s comments follow Adviser Ratings data that revealed around 1,200 advisers left the industry in the second quarter of 2020, and about 600 in the first quarter.
The large licensees were responsible for the bulk of these movements, with institutions accounting for just 38 per cent of the total advice market by June 2020, while privately owned groups with 30 advisers or less made up 31 per cent.
“We’re still seeing a lot of advisers shifting away from large dealer groups, and at times that’s due to their own choice, but other times it’s due to changes in the AFSL that they were with,” Ms Willmer said.
“There’s a few positive changes coming as a result of that and we’re seeing advisers spending a lot more time thinking strategically about where their business is going in 2021.”
Ms Willmer said the increased drive for independence among advice practices, combined with the need for agility during the pandemic, meant that advice groups had become better informed over the course of the year around how to build a leaner, more efficient and more automated business.
“Advisers are now more educated as to what they’re looking for in their business to make it run more effectively. To me that shows that they are forward planning, they’re understanding the processes they have in their business because everything has to be quite transparent – you can’t just run on feel,” she said.
“It’s around compliance, but also how they are managing their teams across the landscape that we see ourselves in now, so how do they know their people are productive, work is being produced in the quality and quantity that it should be, and how are they servicing their clients to the right level as well.”
Some years ago, Once a quarter I would drive 3 hours (about 6 hours round trip) to a compulsory CPD day and hear a fund manager give a market update that was 3 months old and that large licensee would sell me there latest product.. If I had a compliance question I would spend half a day trying to get one of a dozen compliance people to phone or email me back…..2 years ago I became self licensed. Now once a quarter I spend a day on the licensee, pay someone for compliance support which is twice as better as what I was getting and my costs fell so much it enable me to put on a part time support worker. My compliance is twice as good because it’s amazing what service you get when I pay direct and it’s so easy to move support providers. Not for everyone but worth looking at.
The fees being charged by large dealers are nothing short of highway robbery. The execs at the top do little for the adviser and only fatten themselves. I honestly don’t know why or how good sensible advisers put up with it. How can they possibly justify it except for the inclusion of PI cover and even then that doesn’t account for most of the fat fees. I’m a simple risk adviser and my AFSL charges me $12K (incl GST) per year incl PI. They are ethical and stable and I have been happy with them for many years now. In the current climate this is ‘fair’ for what they do. They leave me alone and handle the compliance and regulatory hassle. No risk adviser should pay more. It is a blatant rip off – anything above $15K p.a for a riskie.
Nothing new worth noting in this article. The same progression that has been happening over the last few years and will continue with advisers moving out of insto to dealer group followed by self licensed. Would be interesting to know why software providers like IRESS don’t feel the need to continue the same price point for advice software when advisers go from dealer groups to setup/join self licensed? I understand the point around scale but surely this boarders on arrogance for traditional incumbents such as IRESS.
Self licencing would be a great option were it not for the outrageous costs to establish and retain. Why this cannot be a more cost effective solution allowing advisers to establish their own licences with strong governance is beyond me. I recently heard of an $80k outlay to simply establish the licence and still $40k ongoing per adviser. Ultimately the whole self licencing thing is a furphy and in many cases is simply large dealer groups providing a spin off service at a similar price point. Why doesn’t ASIC provide a set fee to give advisers a ticket to the game and allow us to get on with helping our clients. This would make advice more affordable for clients by reducing our costs to serve and remove a lot of the pointless red tape.
Dont believe everything you hear/read. Just got ours up and running in 4 months and circa $30k costs including PI. $10k of that is capital injection to cover excess.
I’m not sure where you are hearing those costs. With us right in the midst of it – that is not our experience at all.
Sure there’s costs, but it’s an investment in your future. All indications are it will be a significant saving on the current licensing costs that our 5 adviser practice incurs.
I suspect some groups have talked up the costs, the existing ones to try and hand onto their niche. The larger institutions to scare good advisers away from it.
Why should it be cheaper than those who do it at scale? Personally, I have been in the industry for over 20 years and have been an RM on large Licenses before commencing private practice. There is no way an individual adviser can keep on top of the client work load, meet OGS obligations, provide good service AND keep on top of the ever changing requirements from ASIC. There is NO WAY I would take that risk
a large licensee you’re paying for multiple layers of management etc ..Look at Sentry Group and their enforceable undertaking some years ago.. They needed auditors to audit the audit process of the auditors that audit the financial planners and those auditors needed to report to the head auditor that solely did auditing..and all those auditors needed personal assistants…1-5 advisers is the key.
That’s why we engage dealer service solutions to help out where we need it. You will find that within a few years of running an AFSL the average adviser gets pretty savvy when it comes to handling it all. Sure, it’s an outlay of time in one area that other advisers don’t have. But it’s also a time saver and revenue generator in other areas by running an open APL and deciding what policies and procedures are applicable to my firm. I left my dealer overlord after they made me sign a double gearing margin loan waiver and file audit. We don’t have a single margin loan in our business. So I spend more time reading ASIC releases than irrelevant documentation pushed down the line by an internal compliance officer.
It’s cheaper because there is no scale in in advice regulation. Every new adviser on an AFSL increases the risk exponentially. Compliance overhead for all advisers in a dealer group increases to account for the lowest common denominator. This is further exacerbated if the ARs run their own small business, rather than being direct employees of the AFSL, because they are so much harder to monitor and control.
Most of the compliance and regulation work can be cost effectively outsourced by small AFSLs. There’s plenty of consultants who do this for a reasonable price. You don’t have to do it all yourself.
As an AR you are taking on huge compliance risk anyway, because dealer groups will potentially offer you as a sacrifice to ASIC if they are copping heat or need to look tough. Advisers who haven’t sold enough inhouse products will be prime candidates for weaponised compliance to be used against them.
The only cost element in self licensing that is significantly higher is PI insurance. Everything else is much cheaper and simpler than dealer fees. Anyone who tells you otherwise is probably trying to scare you, in order to cling on to their dealer group inhouse product revenue.
Yes – I was quoted similar figures when commencing my search. We were speaking to the wrong people…mine cost me $7,800 for the assistance, $3800 to ASIC, I have PI of $1,000 pm to pay and a dealer to dealer fee of around $21,000 pa for support.
…oh and only took 4 weeks to get approved in principle…
Self licensing is not difficult to put in place, nor is it erroneously expensive. The problem i would see these days is the very high cost of PI and runoff cover. I heard recently that you can only get runoff for 1 year now? Sad times indeed.
Mine took 2 weeks to get the AFSL in 2017. Paid some $7K for assistance. Had to inject $10K to cover excess PI cover, the all up running costs between two advisers is about $28,000 each and that’s PI but I do pay for ongoing compliance support