The expansion of micro-AFSLs as larger players lose the control they once had demonstrates the changing tides of the financial advice industry.
The Australian Financial Services Licensee (AFSL) landscape has experienced a notable shift since 2019, with the number of large players continuing to fall as advisers looking to set up their own licensee increases.
According to Colin Williams, founder of Wealth Data, self-licensing can be defined as licensees with less than 20 advisers.
Exclusive Wealth Data analysis provided to Money Management shows that the number of AFSLs in this cohort providing holistic advice, which excludes accounting firms and superannuation funds offering limited advice, has grown from 1,253 in January 2019 to 1,615 in October 2024. This marks a rise of 29 per cent.
The largest growth was seen with holistic licensees that have one to two advisers, which has increased 54 per cent from 565 to 869 over the five-year period.
Some of the key reasons why advisers choose to go down the self-licensing route include the desire for greater freedom and responsibility. However, industry professionals have cautioned the added compliance responsibilities and time commitment this brings, meaning it isn’t always a “grass is greener on the other side” type of situation for everyone.
Meanwhile, licensees in the large end of town with 100 or more advisers have halved during the five-year period from 50 in 2019 to just 25 in 2024. Major names in this space include AMP Group, Count, WT Financial Group, Centrepoint Alliance, and Rhombus Advisory.
AMP and Insignia Financial have both made significant divestments in the advice sector, with the former selling its licensees to Entireti for $10.2 million and the latter seeing its Rhombus Advisory firm exit as a standalone business.
“The reality is that the major groups are down by half while small licensees have increased their advisers numbers despite the overall market crashing. The dynamics have changed in the marketplace and I believe this creates issues and opportunities,” Williams reflected.
In particular, the expanding proportion of smaller licensees has meant more work for ASIC in maintaining oversight of the market, the founder said. This coincides with recent concerns raised by Ensombl CEO Clayton Daniel, who believes it has become increasingly challenging for the regulator to monitor the field effectively due to the rise of self-licensing.
Moreover, Williams observed how the shift towards running your own AFSL has prompted larger licensees to provide support services in this space instead, such as AMP’s Jigsaw Advice Solutions for self-licensed practices.
He continued: “The story is about how the large licensees have struggled. Many of these now provide services to self-licensed firms, but their level of control is diminished. For advisers who left large licensees to start their own, they have to establish processes and training which can be challenging and they may miss the support network they once had.”
Businesses such as The Principals’ Community have filled this gap by offering support services to self-licensed advisers, meaning they can access a source of collective knowledge to operate their licensee effectively.
According to Daryl Stout, national business growth manager at AMP’s self-licensed offering Jigsaw, one of the top characteristics that advisers seek from an AFSL is “access to a great community” to learn and exchange ideas with others.
