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Demand running hot for blank AFSLs as instos exit

Advisers terminated by large institutions are increasingly looking to buy AFSLs with no clients attached to speed up the licensing process if they can’t find a suitable home at another dealer group, a financial services M&A consultant has said.

Radar Results’ latest market update noted that the sale of ‘vanilla’ AFSLs, separate to client books, was an emerging opportunity for advisers looking to exit the industry.

“Financial planners who have been using their own AFSL to run a business can sell the AFSL once the clients have been moved off the licence,” the group said.

“There's been a significant demand for vanilla style AFSLs, particularly now with many larger licensee groups shedding their advisers.”

Radar Results said with most of the large institutions either exiting the advice space or revoking planners’ authorisations if they were no longer profitable, advisers were looking for easy ways to remain in the industry.

“Many advisers were asked to either find another licensee or retire. If they were unable to find another licensee to join, then an option was to apply for an AFSL, but this can take 12 months,” the group said.

“A solution was to buy an AFSL in the marketplace, which means they are licensed quickly, possibly within a month or so.”

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The group said the sale price commanded for a blank AFSL depended on the conditions of the licence, with some valued at up to $1 million.

“The cost to buy these AFSLs can range from $20,000 for a basic vanilla one, up to $100,000 for one that provides options and derivatives trading and may also include a managed discretionary account (MDA) service,” Radar Results said.

“An AFSL that has forex trading capability can command $1 million, but are rare.”

The group also had a number of full practices for sale, particularly in Sydney and regional NSW, including a business in Sydney city with $1 million recurring revenue, and a practice in Newcastle with $580,000 recurring revenue and 200 clients.

Other hotspots of sale activity included southern Queensland, where practices were for sale in Hervey Bay and the Gold Coast, and two Tasmanian-based practices with $340,000 and $500,000 of recurring revenue, respectively.