Some planners under-estimating self-licensing pitfalls
Many planners who opt for self-licensing are seriously under-estimating the workload associated with maintaining an Australian Financial Services License (AFSL) according to Australian Unity Personal Financial Services chief executive, Steve Davis.
Davis has pointed to the number of advisers seeking to move from self-licensed status to under the Australian Unity brand and claimed that many have been spending up to a third of their time dealing with compliance issues around maintaining an AFSL.
"We have had a few previously self-licensed advisers join us recently, as well as a few others who are currently in talks with us, and they have all complained about the huge additional workload caused by the self-licensing responsibilities," he said.
"These advisers typically say they were spending nearly one-third of their time working on administration, compliance and risk management tasks just to maintain their licence, instead of spending time in front of clients or growing their business," Davis said.
He said the opportunity cost for these advisers was significant and, in addition to that, they had discovered that the direct costs of maintaining their licence were higher than the fees they now paid to Australian Unity to provide compliance and administration solutions for them.
Davis acknowledged that the trend to self-licensing had accelerated lately with both advisers and accountants heading down the path amid increasing perceptions that it was simple, cheap and easy to operate their own AFSL.
However he warned those advisers and accountants who were thinking ‘I'll try self-licensing for a few years and if it doesn't suit me I'll just relinquish my licence' that they needed to understand the back-end implications of liability and PI insurance.
"A big shock for advisers handing back their license is that they are still exposed to client claims against their licence for a further seven years," Davis said "So they need to purchase PI run-off cover, and the cost for the required seven years run-off, if they can get it, in our experience is generally around the same as five years of typical PI premiums for self-licensed advisers."
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