In a statement yesterday, Mr Harding-Davis said while going self-licensed is a good option for some advisers, for others, it can cause implications down the road.
Some difficulties, for example, could arise at the time of sale, he said.
“It is unlikely that the acquirer will want to buy the corporate entity and the licence,” Mr Harding-Davis said.
“The risks attached to this are potentially enormous and require a vastly greater level of due diligence. This of course adds significantly to the costs, complexity and duration of a transaction.”
Mr Harding-Davis also said that “time and distraction” can also be issues with having an AFSL if the right resources are not in place to carry out the work required.
“One firm I spoke with had assessed this time to be one day per week for one of the principals. The opportunity cost of this time is material,” he said.
“For example, at a common billing rate of $300 per hour, it runs to more than $100,000 of time spent on non-billable hours.”
Mr Harding-Davis added, “I have had two conversations with self-licensed firms handing back their licenses, and in both instances, it was the time and distraction which was taking them away from their clients and running their business.”
“As it happens, many years ago practices were primarily self-run businesses and groups of advisers coming together, sometimes even forming managing agencies,” he said.
“Now we’re going back to these business models, but with the greater level of governance and compliance that comes from being a holder of an AFSL.”
The dealer group model is broke. We need to create an environment where individual licensing and individual advisers being a responsible manager should be normal practice, especially if we want to lift professional standards and prevent over regulation in the industry. We can’t have advisers hiding amoungst 200 other planners and popping there heads ups at another firm when things go wrong, and have all the other advisers paying for that one poor adviser via extra red tape. Most self licensed advisers concur it’s something they should of done years ago and frankly, saying it’s costing $100,000 is just plain wrong. There is just too much individual risk belonging to a larger dealer group and paying exuberant dealer groups fees that cater for the lowest common dominator/adviser and layers of management is a waste of your and your clients money. The requirements of being an individual adviser with a large dealer group and the requirements of a responsible manager, running your own license are quickly becoming the same, so why not go self licensed,save money and help promote professionalism in the industry.
Agreed, and even if it was costing close to $100,000, one adviser I know recently obtained his own licence as he was already paying $55,000+ a year (% of revenue model) to his old dealer group for very little value.
There are now fixed fee options where the fee is commensurate with services received.
Aware of that Rob, but didn’t apply in this case. The point was that he was already paying significant amounts, so was not fazed by the costs of getting his own
I agree the old model for the dealergroup is broke but there are a number of new options that have addressed the shortcomings and also get the good bits which you cannot get by yourself.
No hard and fast rule applies across the board simply whatever works for the particualr adviser and their business.
Ensure you partner with the right licensee to support you….preferably one who understands your model, works alongside you and is collaborative. The “old school” dictatorial institutionally owned Licensee is not the way to go.
If self licensing is not for you then the chosen AFSL must be a good match to your values.
You also need to understand how the dealergroup operates for all AR’s and not just your own business to truly understand the inherent risk that the dealergroup is operating with. Their reputation will become yours.
Agree not for everyone. However it is enormously empowering for day to day servicing of clients without outside influence. It also means your business has more value in a sale or lending context as the underlying longevity of a self licensed business is considered to be greater if the correct succession plan and dependency issues are attended to. Very much worth the cost if you are prepared to walk the walk every day. if not, use a dealer group that is compatible with your offering.