Financial advisers want greater control over how they run their businesses, evidenced by the 600 new Australian Financial Services Licences (AFSLs) granted by the Australian Securities and Investments Commission (ASIC) in the past four years.
That figure doesn’t include the applications that are currently with ASIC or the hundreds more expected to be lodged in the next few years.
Not only is today’s heightened media and regulatory scrutiny causing more advisers to rethink the traditional dealer group model but there has always been an underlying natural tension between many advisers and their licensee.
A major cause of tension is that advisers are also small business owners who are focused on building their own business. They know and understand their clients intimately and they trust their staff and systems. Their gut feel is that they could implement processes that better suit their specific business needs and manage the risks of running their own licence.
There are three options for advisers.
- They can partner with a dealer group to develop sensible and practical services at a reasonable price. The right dealer group partner can provide economies of scale, integrated technology and compliance, and a strong risk culture.
- Advisers can gain their own AFSL and run their back-office inhouse. This option requires a corporatized business and inhouse expertise with strong controls in place to ensure costs don’t blow out.
- Alternatively, advisers can self-licence and outsource back-office services to a third party like LaVista Licensee Solutions. This option can deliver the benefits of a dealer group (scale, efficiencies and compliance) with coaching and support to meet responsible manager (RM) obligations.
Customisation v one-size-fits-all
Dealer groups authorise many, different advisers.
They set the parameters for, and supervise, every practice in the group, irrespective of their business model and processes. They are liable for the advice of all of their advisers.
As a result, dealer group processes can be designed to cater to the lowest common denominator.
Add to the mix, large institutional ownership and the tension is amplified ten-fold.
Given this tension, there should theoretically be many more than 600 new AFSLs.
But it takes time, money and effort to gain an AFSL, and that’s only the start of it.
The ongoing responsibility and accountability for managing an AFSL is huge.
Being self-licensed is a fundamental change to company’s structure and balance sheet. While all revenue flows to the AFSL, so do all expenses and ultimately, risk.
Based on our discussions with advisers, their main concern is around meeting their RM responsibilities and protecting their business. They don’t know what they don’t know.
Advisers say they’d be more prepared to take the leap if they had support to understand and meet their responsibilities, including access to traditional dealer services including the integration of advice documents, compliance and remuneration. They also want help managing their Fee Disclosure Statement (FDS) and opt-in obligations.
Catalyst for change
It’s likely that the fallout from the Royal Commission will see more advisers seriously inquire about gaining their own AFSL.
LaVista Licensee Solutions has recently been established to help advisers gain and manage their own AFSL.
Advisers can choose from a comprehensive menu of licensing services to suit their unique needs, circumstances and budget or opt for an off-the-shelf package of essential dealer services including advice documents and templates, compliance manuals, and education and training.
The team behind LaVista Licensee Solutions is the same team behind CoreData’s Licensee of the Year for 2017 and 2018. Based on research by CoreData, the services that underpin LaVista are first-class with the group ranked number one for research, compliance support, adviser technology, technical services and revenue payments.
Find out more about LaVista Licensee Solutions.
Mike Pope is Chief Executive Officer of LaVista Licensee Solutions. He can be contacted at mike.pope@lavista.com.au.
