Self-Licensing for Financial Planners

Should I Stay or Should I Go? Part 1 – The top 5 reasons to stay with your licensee

Posted by Anne Wilkinson on Aug 6, 2019 4:31:21 PM
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Estimated read time: 2-3 minutes
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Topics: RG105 | AFSL CPD | Responsible Manager Fundamentals


Financial planning businesses are evolving, as new licensing models emerge. In this two-part blog series, we examine the pros and cons of the AFSL market, starting with the top five reasons to stick to the traditional licensee approach.

Part two of our look at financial planning licenses takes you through our top five reasons to self-license.

Part 1

In the current environment, many financial planners are starting to question the viability of remaining loyal to large licensees. According to Adviser Ratings1, there has been a shift away from large institutions to privately-owned licensees over the past 12 months. In fact, privately held licensees now account for 55.4% of total advisers. However, the same report shows that the majority of planners are still attached to licensees with 10 or more authorised representatives.

Self-licensing may be on the rise, but the old ‘there’s safety in numbers’ approach to financial planning is a hard habit to break.

To help you weigh up the pros and cons of self-licensing, we’ve identified the top five reasons to stay or go. In this blog, we look at why you may wish to remain with your licensee.

Top 5 reasons to stay

5. Security of the known

With everything going on in the industry, one of the simplest reasons for remaining with a large licensee or institutional partner is not having to deal with unnecessary change. Existing advisers, who have established businesses, may simply prefer to keep things as they are, and concentrate on their clients.

There are certainly advantages to maintaining the status quo. For example, one of the selling-factors used to lure advisers to dealerships around 10 years ago was generous BOLR agreements. With practise values on the decrease, financial planners nearing retirement no doubt feel they will be better placed sticking to their original agreements than if they attempted to sell in the open market.

Combine done-deals like this with the opportunities for career progression that larger licensees provide newer entrants and there’s value to be found at all ends of the spectrum.

4. Time away from business

The process of switching licensees is not a simple one, and some advisers report long periods of ‘down-time’ while they transition. A small survey of FPA members who had opted to self-license prior to 2017, indicated that the planning process took upwards of 12 months, factoring in things like selecting compliance partners, preparing business plans and securing support for the license application.2

This is all before the application is actually lodged and reviewed by ASIC, which, according to the regulator’s 2017-18 Annual Report, is taking up to 8 months in 80% of cases.3 Add to this the 60% likelihood that the first application attempt will be rejected, and you’re looking at a significant period out-of-market. In contrast, two-thirds of advisers who switched between established licensees reported the transition took a little over a week.1

3. Cost

Financial planning is an expensive business. Along with the costs associated with compliance and regulation, businesses also need to allow for significant operational costs, such as financial planning software subscriptions, marketing and para-planning services. Oh, and then there’s Professional Indemnity insurance – a cost that seems perpetually on the rise.

But with a licensee of 10 or more representatives, these costs can be spread across the practises. There are also economies of scale to be achieved, with suppliers like technology partners and legal services. The bigger the licensee, the bigger the savings.

2. Product choice

Reviewing and rating products is a time-consuming business. Licensees with in-house research teams, or access to support from external agencies, appeal to time-poor advisers who want to get on with the business of advising.

And, the security of knowing product recommendations are built on solid research helps ease compliance worries.

1. Compliance support

The continued tightening of regulation and increased compliance burden is the primary reason advisers list for wanting to hitch their wagon to a large licensee. This is especially true for new entrants to the industry, who want the security of oversight while they get a feel for the market and build their career.

The penalties for falling foul of the regulator are high, and it is a risk many advisers are just not prepared to take. Similarly, with the sheer volume of regulations and legislative changes that have been applied to the industry in recent years, many advisers feel they simply do not have the time to get themselves across all the ins and outs.

There are certainly compelling reasons for remaining with an established licensee. But next week, we’ll examine the growing trend for financial planners to self-license.


1 Musical Chairs Report




To self-license, or not to self-license, that is the question. There’s plenty of buzz around the industry suggesting that self-licensing is the way to go. So, we decided to go digging and sort the fact from the fiction.

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