What you need to know before you get an AFSL

Over the last few years, we have seen an increase in the number of successful financial planning businesses make the decision to go down the self-licensed path, by obtaining their own Australian Financial Services Licence (AFSL).

As with all things, the lure of greater flexibility and control do come at a cost, so it is important that if you’re considering the move you’re aware of and understand the responsibilities.

There are many things to think about when heading down this path, and some of the key questions you need to answer in your own mind include:

• What is driving this change? What has happened with your current dealer relationship and are you moving for the right reasons?
• What are you hoping to achieve from your own AFSL? (self-sufficiency, flexibility, control, growth prospects)
• How will running your own AFSL remove key barriers that are preventing you from achieving your strategic objectives?
• How will you manage the AFSL and, although you can’t outsource the responsibility of running the AFSL, what resources will you need and what will be outsourced versus managed internally?

Once you have made the decision and have clarity around why you are going down this path, the next step is understanding exactly what is involved.

At this point you will likely have more than your fair share of questions, so here are some things you must consider:


• Timing to establish the AFSL – when do you want to go live and what assistance do you require to establish the AFSL?
• Smoothing the transition – ensure you have access to the expertise required to ensure a smooth transition from your current licensee to your new AFSL;
• Professional indemnity insurance – explore the cost and appropriate level of cover you will need to cover your business from day one;
• Good governance – identify what’s involved in developing and implementing a governance framework that supports your business. This has to not only help meet its AFSL obligations, but also protect your brand and reputation;
• Get the software right - have an appropriate software solution that will support your business within the new environment and ensure that the business has capacity to support this solution; and
• Investment research – have access to investment research to support investment decisions and for client collateral.

What nobody tells you
The reality is that the grunt work starts after you have obtained your AFSL. While obtaining your AFSL can be a time consuming and rigorous process, having the right support can make all the difference in ensuring a smooth and compliant process.

The majority of businesses obtaining an AFSL will use the services of a specialist compliance or legal consultant to guide them through the application process. The advantage of outsourcing this component is that it will save you time and allow you to focus on preparing the business for a successful transition.

Moving to your own AFSL will have an impact on your existing business and people. Ensuring your current resource model can handle the new obligations associated with running your own licence will be critical. The additional responsibility means your time needs to be managed appropriately. Your people may also need their position descriptions and goals updated to ensure their behaviour and output is being managed in line with these obligations.

It is an exciting time, however, how you manage your resources will help determine the sustainability of your license and your brand in the long-term, so it’s important you get the right support.

The value of a strong community
While many new licensees enjoy a new sense of freedom after becoming self-licensed, it doesn’t mean you need to be on your own. To avoid ‘professional loneliness’, think about ways to engage with the broader advice community and stay connected.

Being part of a community with other high quality, professional, self-licenced businesses will give you access to networking opportunities, peer mentoring, resources and support.

Operating under your own AFSL, but within a community and network is one of the most rewarding perks. This is because it enables you to tap into knowledge sharing and best practice with likeminded peers.

Some licensee service providers already have an established broad network of high quality self-licensed practices and the power of leveraging off the experience of other self-licensed practices cannot be underestimated.

Tailor to your needs
Leveraging off an existing community brings benefits, but also allows you to control the support services to your business. High quality communities will provide support in the areas of governance, compliance, strategy, technical services, paraplanning, advice documentation, technology, research and professional development.

The reality is that if you’re just starting your own AFSL you might not have the resources and expertise internally to fulfil these areas. But if you’re part of a network that provides a broad offering, you can pick and choose what you need to best support your business for sustainable growth.

Not only can it help you to call upon the services you need, but this type of community can help you challenge the robustness of your processes, operations, and business model. In an industry that is rapidly changing, it’s surely a worthwhile add-on.

Be selective
One of the clear benefits of running your own AFSL is having the freedom to engage service providers that align with your own moral fibre and support the exact requirements of your business model.

Here it’s important to do your homework to ensure your service providers give the right support, guidance, and have the best expertise.

Before you partner with a service provider, ensure they tick these boxes:

• High quality practices within the community;
• Appropriate knowledge and expertise;
• An experienced team(s) to tap into;
• Commitment to supporting self-licensed businesses; and
• Provide the necessary professional support for if and when things go wrong.

Whether you are looking to obtain your own AFSL or just weighing up whether you should remain with your current licensee, it’s important to research and access the right team of experts to ensure your business understands the benefits, risks and costs of all relevant options.

Make sure you speak with an expert who deals with all aspects of the AFSL arrangements (not just the application for an AFSL) to ensure your business has the right facts to make informed, relevant and strategic decisions, and, most importantly, set it up for sustainable growth.

Kon Costas is the managing director of BT Select

What you need to know before you get an AFSL
Kon Costas
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