While the Association of Independently Owned Financial Professionals (AIOFP) supports the current licensing regime and believes there is ample room for both the Dealer Group model and self-licensing of individuals, the group has raised concerns about the potential strain on taxpayers if the current self-licensing trend continues.
Last year, an Investment Trends report revealed that 37 per cent of advisers plan to leave their licensee in 2023, of which 70 per cent intend to go self-licensed.
Although the AIOFP strongly advocates for offering consumers and the industry a wide range of choices, its executive director, Peter Johnston, recently shared with ifa that self-licensing creates challenges for advisers, regulators, and member groups.
Despite the potential benefits of having the freedom to choose, the AIOFP recognised the difficulties that arise with self-licensing.
“We don’t think taxpayers will be happy if ASIC needed to employ thousands more public servants to manage circa 14,000 additional individual AFSL holders,” Mr Johnston said.
The AIOFP’s stance comes as ASIC is reportedly processing AFSL applications within seven weeks, encouraging many advisers to venture down the self-licensing path.
Mr Johnston emphasised that Dealer Groups play an important role in monitoring adviser behaviour and have a commercial interest in ensuring advisers act diligently and in the best interests of their clients.
“This relieves some of the pressure on ASIC to monitor behaviour,” Mr Johnston said.
Moreover, he assessed that associations should not become quasi-regulators and hand out penalties for poor behaviour.
“That should be left up to ASIC/AFCA and the courts,” he said.
“The only roles associations should have are referring poor adviser behaviour to ASIC and acting in the best interests of its members, consumers, and the industry in general”.
Mr Johnston also identified several pressing issues for those who chose to go down this path, including scale, isolation, and finding new client opportunities.
Namely, as a new entrant, or someone who has been licensed to a large dealer group, AIOFP explained that it can be difficult to connect with like-minded professionals and obtain critical services such as professional indemnity (PI) cover, Continuing Education Program (CEP) solutions, and IT/software support.
“Venturing into your own stand-alone business space can be an intimidating experience,” Mr Johnston said.
Late last year, chief executive of Lifespan Financial Planning, Eugene Ardino, told ifa that with many advisers seeking to be in control of their own destinations when it comes to compliance and technology, self-licensing will continue in 2023.
I was wondering where AIOFP was getting their funding, given their low membership numbers. I think this confirms it. They are being funded by certain dealer groups. So much for AIOFP’s claim to be the only association representing advisers.
Unless a Licensee checks all advice provided (which I dont think any do), the licensee is only as strong as its weakest link. It is therefore a significant risk for any advice business not to be self licensed as you have no control over the quality of advice that other advisers in your licensee gives hence a licensee can be shut down at any time and on short notice due to a few weak links.
No, Dealer Groups are a stain on the industry. There is no reason any professional, & qualified adviser needs to be under a dealer group or an AFSL. This should have been addressed by the QAR.
Sorry Peter but the decision to obtain my own AFSL after decades of being a puppet to an institutional licensee (where I was subject to a regime designed with the lowest common denominator in mind) has proven to be the best decision i”ve ever made. We didn’t have the challenges obtaining PI cover, CE solutions and software that you suggest exist and as for connecting with like-minded individuals, that is gained via my membership of my chosen association.