ASIC is scrutinising AFS license applications very closely – one slip and all your hard work is undone; your application is rejected and suddenly you find yourself back at square one. In this article, we share some tips for staying on track and getting through the application process in one piece.
Experienced hikers, mountaineers and climbers will all tell you that the key to a successful trek is preparation. Just like these adventure-seekers, financial planning business owners face an uphill battle when it comes to securing an Australian Financial Services licence. But with the right mindset, you can be successful in your endeavour. Here’s what you need to know if you plan on tackling the AFSL trail…
Assemble the right team
Regardless of their own experience, every adventurer needs a support crew – a team of experts to help you avoid any nasty obstacles and push you forward when the going gets tough. For the AFSL applicant, the first member appointed to the team should be a compliance partner. There are plenty to choose from in the Australian market, especially as self-licensing becomes an increasingly popular option for financial advice businesses, but make sure you select a partner who has experience completing and submitting AFS licence applications.
Your compliance partner will be a key decision maker when choosing your other team members – PI insurer, Responsible Managers, technology partners, etc – so it’s vital that you have a good working relationship and that you are open and transparent with one another.
Holding the ropes
On the subject of Responsible Managers, they are going to be tethering your compliance ropes, so this is not an area where you should cut corners. ASIC expects Responsible Managers to play an active role in fostering the compliance culture within the organisation, and so they will be looking closely at your nominees to ensure they have the relevant knowledge, qualifications and experience for the product authorisations you’re seeking a licence for. You will be required to submit a number of documents related to your Responsible Managers, including certificates, police and bankruptcy checks and business references.
Follow the map
One of the first reasons AFSL applications are rejected by ASIC is because they are incomplete. It seems obvious, but it’s vital you do not stray from the path. ASIC sets out in great detail the questions you need to answer and the evidence you need to supply. ASIC's clear checkpoints keep you on the straight and narrow, so there’s no excuse for not getting to the endpoint safely.
Also, make sure you’ve clearly understood the instructions – if information is submitted in the wrong format, ASIC may still reject your application.
Check your equipment
Before it grants you an AFSL, ASIC wants to make sure your business is a viable operation; it’s all very well to be compliant, but can you actually run a financial services business?
Although it is described as an ‘overview of your business’, ASIC actually wants a detailed description of the type of business you want to run, including how you will derive income, who your typical clients will be, how you will deliver services to clients and where your business will operate from. Essentially, you need to create a business plan for your organisation, just the same as you would for any small business, to demonstrate to the regulator that you have thought through the ‘how’ of providing financial services to clients.
Depending on the kind of licence you are applying for, ASIC will also request evidence of how you intend to manage your compliance requirements. Documented processes and procedures, covering areas such as the training of your representatives and your dispute resolution and risk management approach may be required – you should be ready to submit these with your application, not after.
Although onerous, documenting these important processes ahead of time will save you from danger down the track.
Give yourself enough time
It can take a long time for ASIC to assess your licence application, but even longer to prepare all the information you need to support it. Keep an eye on the time and plan ahead – you don’t want to be caught out after dark.
For example, one of the most important elements you need to secure for your business is your Professional Indemnity insurance. It can take several weeks or longer to obtain cover, so it’s a good idea to start this process early. ASIC may not reject your application outright if you do not have PI in place at the time you apply, but they cannot grant your final AFS licence until you have the necessary arrangements in place.
Although the process of self-licensing may appear daunting, with the right preparation and support crew, it is far from insurmountable. And the view from the top can be incredibly satisfying!