Time to create adviser-centric AFSL models
Financial planning licensees need to update their models and become more adviser-centric if they want to retain advisers considering the self-licensing option, according to Australian Mortgage and Financial Advisers (AMAFA) managing director, Keith Marshall.
Referencing CoreData research estimating that the true cost of self-licensing for solo advice practices can exceed $300,000 a year, Marshall said the advice industry needs to confront the uncomfortable reality that some advisers are in outdated licensee models.
He said the go-it-alone sentiment is increasingly shaping how advisers think about self-licensing, not always as a genuine aspiration, but as a way to exit arrangements that no longer feel fit for purpose.
“We believe many advisers are not leaving their licensee to pursue their own AFSL because they reject oversight, but because the value equation no longer stacks up,” Marshall said.
“They talk about things like high costs without corresponding high service, rigid systems with limited flexibility, slow decision-making, one-size-fits-all approaches to compliance, and attitudes that continue to treat them as distribution channels rather than partners.”
Marshall said that while it is understandable that advisers feel constrained by outdated models, it is important not to romanticise the idea of self-licensing.
Self-licensing carries significant regulatory responsibility and recent research suggests it can be expensive.
“CoreData Research has estimated that the true cost of self-licensing for solo advice practices can exceed $300,000 a year in some cases, when costs and lost client time are taken into account,” he says.
“The research also suggests some advisers may be underestimating the price of freeing themselves from their licensee, not only in tangible terms, such as fees, professional indemnity insurance and compliance support, but also in opportunity cost, and the mental load of being a responsible manager as well as an adviser, entrepreneur and business owner.”
Marshall said ‘freedom’ does not have to mean carrying every burden personally. It can be about building a practice that is sustainable, scalable, profitable and compliant, without operational overload.
“For many advisers, the smartest definition of freedom is not becoming a responsible manager themselves, spending hours each week on governance, coordinating suppliers and hoping the framework holds under pressure,” he says. “It’s choosing a licensee that helps them run their businesses their own way – and spend the highest possible proportion of their week on client-facing work, without putting their licence and livelihood at risk.”
In practice, Marshall said this means licensees need to deliver practical, adviser-led support, including flexible software choice, paraplanning support that restores adviser capacity, administrative assistance that removes bottlenecks, and genuine partnership and community that helps reduce stress and isolation.
“If the licensee model is to survive, adviser-centricity must be operational, not just aspirational,” he said. “Freedom shouldn’t be about feeling like self-licensing is the only option. It should be about enabling advisers to run compliant businesses the way they want to run them.”
No one runs a compliant AFSL or Adviser model as the Gordian Knot of Hot Mess Govt mass over kill laws & code are literally impossible to comply with.
Govt has it self & advice so utterly strangled in BS regulatory madness they don’t know how to untangle it.
Thus advisers look for a path of least resistance and that ain’t big conflicted AFSLs.
And it ain’t ISFs sad AFSL “independent” joke either.
That “research” was a complete joke, no doubt funded by vertically integrated dealer groups trying to defend their model.
It estimated the value of direct costs and lost revenue associated with running your own AFSL. Fair enough. Those impacts are quite real, and far too high. But it completely ignored the direct costs and lost revenue for a CAR trying to comply with a third party licensee’s compliance regime. Those costs and revenue losses are even higher!
Third party licensees have to design systems for the lowest common denominator adviser. In most cases they need to overcompensate with rigid processes, to enable inhouse product sales. And because they don’t employ the advisers directly, they need to overcompensate to provide more visibility and control.
Self licensing is ultimately cheaper if you do a true “apples to apples” comparison.
As a self-licenced adviser, in a single adviser practice, Core Data’s claim that it costs $300k to run a licence is utterly offensive. I was previously with one of the large dealer groups which was at the cheaper end of the spectrun. I didn’t set up my own AFSL to save money or time, however I am saving significantly on both fronts.
What Core Data fails to understand is the massive amount of time wasted by following convoluted and frankly ridiculous rules imposed by dealer groups to protect themselves from the lowest common denominator. By running my own AFSL, I am more compliant, at less risk, more efficient, more client friendly and I have been able to increase the number of clients I serve by about 15%. I am also less stressed, and have a better work-life balance. FYI – It costs me less than $45k pa, plus $20k one-off to set it up (this includes software, PI, education, research, compliance consultant, ASIC levies, financial auditor and the extra accounting cost) I lost about 30 days of work during the transition plus I had to work 4 weekends. This included transitioning to new software. The compliance consultant made it all very easy, and continues to help us run the licence without any fuss.
My only regret is not doing it a decade earlier.
I agree with other posters. $300K is grossly misleading. When compared to the licensee I was previously attached to, I’m saving about 10% on costs. That’s a significant saving for a solo adviser like me. Yes, there are some new things which take time away from advising. However that impost is far less than the time wasted at my old licnesee attending product-flog PD Days and conferences, and dealing with all the over-the-top compliance nonsense.