There are many types of adviser practices that have obtained their own licence and run a successful advice practice and business, from larger multi-adviser practices to single adviser operations, from general financial planning practices to those that specialise in say SMSFs or particular investment strategies.
What the successful ones have in common is they specialise in areas of expertise. For some this is investment strategies, others delivering full service financial advice and others operational efficiency. All, however, want to control their own professional and business destiny. The most successful, both financially and in terms of life balance are those that focus on their specialisation and outsource as much of the rest as possible.
Practice principals considering obtaining their own AFS licence need to have a clear idea of who their clients are and the value proposition they want to deliver. They need a clear vision of how they will run an efficient and profitable practice.
There are additional compliance and risk management responsibilities associated with holding a licence, along with some financial risk, however these can be managed effectively with a clear business plan and a healthy culture.
Taking responsibility
As a licensee you need to be comfortable taking responsibility for every aspect of your practice and business, including quality of advice, compliance, and risk management. Your professionalism, independence and reputation will be critical to your long-term success.
Most successful licensees have a mentor or strong business partner who can provide guidance, support and direction. Every successful person has help from others – someone to share their challenges, issues and be a sounding board for their plans and decisions.
Many advisers are attracted to the idea of self-licensing because they are frustrated with particular aspects of their current dealer group. Perhaps they believe they don’t provide value for money, are too bureaucratic, don’t like their choice of platforms and systems, or find their approved product lists and advice templates too restrictive. Often, advisers have become frustrated with poor public perceptions of their dealer group’s parent institution and what their clients may perceive as a lack of professional independence.
While these are all valid concerns, that doesn’t necessarily mean the answer is to obtain your own licence. It could be that you just need to find a dealer group that is more aligned to your values and business model.
However, if you do want to take control of your destiny, there has never been more help to guide and support you on this journey to professional independence. This includes the full range of services from business planning, coaching, integrated CRM and compliance systems, including full compliance templates to help get new licensees up and running. It is critical that very quickly on their new journey licensees are quickly able to focus on generating revenue and delivering quality advice.
How do I transition?
The first thing to consider is developing a vision for you and your family, preferably with your spouse. This is key in the early stages to ensure there is alignment, as there will be positive and negative impacts for others. Focus on what you want in terms of lifestyle, financial returns and level of risk that you are comfortable taking. These are exciting times, however you need to carefully plan the steps.
Next, consider your current dealer group agreement. Are you able to transfer clients and referral agreements? What are your requirements to notify your intentions, are there non-compete clauses, and what are the protocols around contacting and transitioning existing clients? Can you talk openly to management and other advisers who have been through the process? And make sure any agreement on the process is in writing. Before you can develop the next stage of your plan you need to have a strong fact base.
Most dealer groups take a pragmatic approach and want to do the right thing by both their advisers and their clients in managing a smooth transition. Of course, ultimately it is the client’s choice as to whether they wish to remain with the current dealer group or transition to your practice under your own licence, so you need to be confident about the quality of your client relationships and how you are valued.
Obtaining your licence
The process of applying for a licence can take a number of months, depending on the scope of your licence proposal, how quickly you can gather the required information such as financial accounts and business references, and how quickly ASIC responds.
You will need to provide a robust business description proving your capability in terms of experience, expertise and resources. This is a very important document, not just for ASIC, but for you, as it will form the basis of any licence approval and the criteria you will have to meet.
Again, good professional help is available to guide you through the process and ensure it doesn’t unduly distract you from running your existing practice and the many other things that will require your attention in setting up your own licence.
One of those key things is ensuring you are able to obtain adequate Professional Indemnity insurance, which will be a condition of any licence approval. This can take time, and depending on your track record, the costs can differ markedly, so you will need to get onto this early.
How compliance obligations change
The first thing that needs to be said is that your compliance responsibilities will not just be the same processes as you conduct now, however diligent you are.
As the responsible manager you will have to ensure the effective running and professional standards of all aspects of the practice, maintaining an up-to-date compliance manual, strong processes and systems, and ensuring all staff receive adequate training. The larger the practice and the more advisers you have, the more time and resources you will need to commit to this.
You will need to maintain a number of registers including for complaints and breaches, and have regular external audits conducted. Once you transition to your new licence, any clients that move over will need a complete review and new Statement of Advice within 6 to 12 months. You will also need to keep the practice up to date with changing regulation and other requirements, and somewhere to turn for guidance on particular issues.
As licensee the products and investment strategies you recommend are one of your most important responsibilities. In addition to good external research, you will need to assure yourself of the appropriateness of every product that your practice recommends.
While all this may sound daunting, experienced principals who receive good external support find that it allows them to take charge of the professional standards across their practice and establish a culture that not just meets regulatory requirements, but is aligned to their own professional values.
You’re not alone
Perhaps the most important thing to remember when you set sail under your own flag, is that you don’t have to do it all on your own. External assistance is available from experienced professionals who have dealt with the same issues many times, as have other practices that have been on a similar journey.
That’s why maintaining a strong network of professional peers can be vital to share ideas and experiences. You might consider establishing your own Board of Advice for your practice and getting involved in your professional association can be invaluable.
At Associated Advisory Practices, a member of the Centrepoint Alliance Group, enabling licensees to belong to a community of like-minded practices is one of the most valuable services we provide. While our licensees encompass a broad range of sizes and business models, they all share one thing in common – the principals are motivated by a strong desire to deliver great outcomes for their clients and take charge of their professional and business destiny – and most believe it was the best decision they ever made.
AAP, a subsidiary of Centrepoint Alliance, provides business coaching, legal services and support for boutique licensees to build and grow quality advice businesses.
