Is self-licensing the future of advice?

Advisers are likely to look towards self-registration with the regulator rather than a licensee model in the future, but self-licensing is not without its pitfalls, according to a panel.

In an Association of Financial Advisers webinar, the panel discussed the future of licensing models and whether they were still fit for purpose after 20 years in existence.

Alex Euvrard, managing director of My Dealer Services, said: “The licencing structure as we sit here today has been around for 20 years. However, the environment with a lot of legislative compliance and otherwise changes is very different and the two are not really aligning.”

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He felt self-registration would bring the advice industry in line with other professions such as lawyers and accountants.

“I believe we have to look towards self-registration with the Australian Securities and Investments Commission (ASIC). That’s how it works overseas, and it actually works really effectively.

“Like other professions, namely the accountants, the lawyers, they all operate under the title of a profession with minimum qualifications, but they don't hold it and they don't need a licence structure.

“Instead of being linked to a licensee, advisers are going to be open to picking and choosing different aspects of different offerings. We have already seen it and will continue to see advisers take control of the industry which is good. I think that’s the right thing to do.

“As to the future of licencing, I believe we need to look at unpacking the whole model and structure and move towards something more beneficial to the adviser, the practice and, more importantly, the end client.”

However, Euvrard and fellow panellist Rachel Bell, business consultant at Affinia, warned there were still some cons associated with self-licensing.

“Licensees have pretty highly-developed model where you put everything together, everyone is working together to develop what they are offering the adviser so they are all in synergy and that does help in this ever-changing environment. This leaves more time for the adviser to look after the client,” said Bell.

She said advisers could find themselves with higher costs for items such as professional indemnity insurance when they left a dealer group and highlighted the network of fellow advisers that a licensee provided.

Euvrard said: “Self-licencing brings freedom, it allows you to really explore different products, services and offerings out there which can be bound and restricted within a dealer group.

“On the other side, you need the resources and infrastructure to be able to properly implement that and it’s no easy feat. It's a process and it needs structure and it needs support to be able to set it up properly and effectively.”

He recommended any advisers considering being self-licenced sought out other advisers who could give them real-life experience of the process.




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Financial planners cannot be considered professional until they are self-licensed. Up until that time, they remain authorised representatives (salespeople) of a "dealer group" or AFSL.

The AFSL seeks scale and efficiency and rigorous A.B.C.D. et al. And all at the scale and efficiency and speed of the slowest, dumbest, least capable adviser in the group. That does not create entrepreneurship in any other way than grinding profit from scale. You only have to look at the ridiculously woeful software pointed at financial planners, to comprehend how limited the scope and scale of advice is. Holistic planning software is absent. There are corners of light and joy but most rely on a central (sales based) platform and single delivery model.

APL's are created with the lowest-common denominator in mind. They are directed at what creates the most profit for the least risk of an AFSL. That argument holds true for any APL, of course - but if every adviser was freed from the shackles of their AFSL's APL then the scale and scope of thinking of advisers would change dramatically.

The benefits of AFSL's are over-stated. They are also usually misdirected. There is nothing to stop self-licenced advisers from forming groups and partnerships and deriving scale from grouped resources. But that is a very different prerogative to being tied by a nosering to an AFSL's requirements, profit directives, compliance ideas and sales preferences.

AFSL's are a relic of a past insurance-based adviser group business model. The Royal Commission expressly looked at the flaws of the model and decided the bias and inherent failures are somehow acceptable.

Keep AFSL's and Australia's financial advisers remain salespeople and representatives of other powers. If you want advisers to be professional then get rid of AFSL control. It's like forcing doctors to sign up to pharmaceutical companies or hospitals before they can practice medicine.

I agree with Michael O'Hara
I am still waiting for my FDS from my licensee that shows how much I paid them, what services were promised, and whether or not they delivered them to me. The real fee for no service is Licencess to their advisers, not advisers to their clients.

Sceptre, that is the best comment on Money Management this financial year and will be hard to beat before June 30, 2023.

Michael I don't disagree with your comments if your only experience is with Bank/insurance company AFSL's but there are AFSL's out there that have no "sales" imperative as they are actually not linked to any product whatsoever in any way. They are completely product agnostic. Whether they retain the license or just act as the collegiate group to which you refer makes no real difference to these organisations.

Like most things, solutions to problems are not just one single simple answer, take energy solutions for the future as a classic example. This "simple answer" fits well into the puerile world of social media debates but more nuanced and multi faceted solutions should be considered for the more important discussions in life, such as this matter.

But are there really many AFSLs for hire out there who don't have a conflicted sales agenda Wildcat? Small-medium licensees may not be selling the same sort of products as banks and insurance companies, but most still receive product revenue of some sort. Managed accounts, custom platform arrangements, and SMSF admin services, are all popular inhouse product techniques. At the end of the day the principle is the same as the instos. The licensee uses their influence and control over their ARs, to sell the licensee's product.

I won't argue they are common place but they definitely exist

Hi Wildcat - you make a very good point.

By way of background, my experience includes institutional management, large and small licence authorities, and responsible manager roles. I'm familiar with the management of advisers, supervision of advisers, product pricing and the nuances of business models. That's not bragging. I've just been around a long time. I've been individually advising for quite a while, and it's still the pointy end that I enjoy most.

One of the difficulties of commenting publicly, is that it is impossible to adequately cover all points in a media text box. My comments are not intended to disparage the individual efforts of any adviser or AFSL teams. Arguing for individual licensing is not automatically negating the benefits the AFSL business model provides.

There are AFSL's that try very hard to isolate the negatives of traditional AFSL licensing. That's good stuff. And if there was individual licensing, those groups of advisers can still pool resources, knowledge and systems for the benefit of scale, diversification and access to other skillsets.

But the adviser is the professional. It is the adviser who should be licensed, not the pooled resource.

I have no concerns with individual licensing. I do think if we go that way the decent AFSL's will become collective enterprises however my concern is compliance will then be treated as more of tick box exercise by some groups as the mutual obligation of liability (adviser and licensee) is now gone, this could lead to more potential malfeasance down the track. At least with individual licensing, and hopefully an independent (i.e non ASIC, non FASEA based) professional standards board will have to deal with the individuals like other professions.

The other route will be the current self licensing route. It's not for me but I both understand and respect anyone who chooses that path and does so with a professional mindset. It's the ones that "left their dealer as their compliance was too onerous" that I would have some concerns over.

In the end, no matter the route, you'll never get all the bad apples out of the barrel. Just look at accounting and law ....BAHAHAHA.

Ah, the common threat of PI premiums. Don't go out, you'll pay heaps more for PI. Total BS in my experience. Yes, my premiums went up slightly but my excess also went down from 25k to 10k.
Yes, consult ppl with real life experiences and don't rely on what the licensees tell you.

The reality is that licensees create an economic 'dead-weight loss' in our industry. Namely an inefficient allocation of resources with businesses effectively all doing the same thing that a regulatory/licensing body would otherwise do. The rest is just creating badged products, services and technology which really don't need to be white-labelled.

In many cases they are running unprofitable businesses by propping up 1-2 man band financial planning businesses.

A) The Financial Services Industry is deeply corrupt with many conflicts of interest. B) Financial Planners are inherently stupid people easily fooled by representatives, licensee's and large corporations. C) Those corrupt forces can easily blame Planners.. hence A+B/C = Never going to be any change

Your comment about AFSL's propping up 1-2 man (let's ignore the sexism to start) band financial planning businesses is well off the mark. What is wrong with an individual or two deciding they want to provide advice to clients? The AFSL regime actually detracts from that possibility.

AFSLs are also a major roadblock to innovation and entrepreneurship. Even those that remain largely product-agnostic still rule with an iron fist and create compliance hurdles unfathomable from any common sense interpretations of legislation and regulations. The modus operandi has become preventing complaints at all costs, and almost every single AFSL business model undermines the best interests duty through their own excessively onerous and unnecessary compliance processes.

wow spot on OverIt come talk to me about my experience with over regulation and fearmongering from my licencee. I am a one man band and doing ok and I am paying a licensee to degrade me and threaten me for small compliance issues they turn into a huge storm in a tea cup. I have broken free I have been granted my own AFSL, life never felt so good....

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