The “fees for no service” scandal led to the disruption of the financial advice industry and has seen major downsizing of the Big 4's advice and wealth management arms.
For many financial advisers, this presents an opportunity to acquire their own financial services licence, rather than be an authorised representative of someone else’s. We are already seeing a reversal of the post-GFC trend towards bigger and more consolidated advice firms, as advisers consider self-licensing as their most viable option to continue operating.
There are, of course many questions that need to be answered before choosing to transition to holding your own licence. Just as an adviser always notes their clients’ circumstances, needs and objectives. It is also important for them to remember what their own circumstances, needs, objectives – and skill set – are when deciding if self-licensing is the right way forward.
- increased control over the direction, operations, culture and reputation of your advice business;
- greater flexibility and choice (particularly in terms of product recommendations, platforms, systems, advice templates and support services);
- freedom from dealer group restrictions;
- reduced compliance risks (due to not always having to follow dealer group directives);
- potential to simplify the compliance process;
- improved outcomes for clients; and
- the potential to increase business revenue and profit.
- your ability to achieve the above benefits is directly tied to effort. There is no longer assistance and resources from a big licensee to rely upon;
- you bear all of the costs yourself, including the initial and ongoing licence costs;
- establishing systems for managing compliance obligations is time consuming;
- you are solely responsible for keeping up with regulatory change;
- you are required to research investment products and develop your own approved product lists (APL);
- there are additional administration, maintenance, training, monitoring and management burdens;
- relevant registers need to be established and maintained;
- client documentation and client interaction reporting processes need to be established and maintained;
- personal stress can increase due to increase burdens and additional responsibilities.
It may appear that the responsibilities that come with self-licensing are more onerous than holding an authorisation under another entities licence. However, for those who want to be in control of their client recommendations and avoid the rigmarole of being an authorised representative, it can be a great opportunity for advisers to put their clients first and ensure they are producing advice of the highest calibre.
For more information about deciding about self-licensing, please do not hesitate to contact a member in our Financial Services team – Contact Us
This publication has been prepared for general guidance on matters of interest only and does not constitute professional legal advice. You should not act upon the information contained in this publication without obtaining specific professional legal advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication and to the extent permitted by law, Cowell Clarke does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting or refraining to act in relation on the information contained in this publication or for any decision based on it.