Self-licensing is a legitimate and valuable part of the Australian advice landscape. It provides colour and character to an increasingly homogenous profession, fosters diversity of opinions on how advisers approach their work, and allows advisers who chafe under the yoke of big-business bureaucracy a place to operate with a greater sense of autonomy and freedom.
When self-licensing is done right, it also delivers genuine consumer choice about the kinds of places they can choose to get their financial advice. But it comes at a price, and with a set of responsibilities. Owning and managing an AFSL is a privilege and only entities that have the resources and the commitment to do the job properly should be permitted to hold a licence.
Right now we have a situation where self-licensing is under the microscope, and there’s an unspoken recognition that too many licensees are underscaled and not committed enough to the task to warrant their continued existence. But a mechanism for dealing with that is being dressed up as the economic issue of funding the ASIC levy, and an argument that the financial burden should shift from individual advisers to licensees.
Such a shift will have the consequence, if not the explicitly stated objective, of driving some licensees out of business. It runs the risk of driving some high-quality, small licensees out of business as well.
If the sector believes that unserious licensees should be flushed out then let’s have that discussion plainly, openly and honestly, because it is actually a pretty good idea.
But this does not necessarily have anything to do with scale, per se. There are large, unserious licensees; and there are small licensees that are deadly serious about meeting their responsibilities and living up to their commitments.
This is about intent, attitude or philosophy, call it what you will. It is about a commitment to the standards and principles of a profession, and it also has to recognise that licensees are servants to practitioners.
If any licensee claims the right to exist, they must meet the responsibility of not dictating, not turning a blind eye to and not simply failing to spot adviser actions that are illegal, unethical or immoral, or which in any other way lead to genuine client detriment.
Small licensees are, frankly, not helping their own cause. The reason for thinking this is an established pattern in the reportable situations data provided to ASIC.
The overwhelming majority of breach reports lodged with the regulator come from a small number of large licensees, while the small end of the market consistently report next to nothing. ASIC has noted this in numerous reports, yet nothing has changed.
Three explanations
Only three explanations are available: that small licensees are not committing breaches, which is not credible; that they are committing breaches and not reporting them; or that they are unable or unwilling to look for them in the first place.
Two of those three explanations should disqualify the licensee, because holding an AFSL includes an undertaking to find your own failures and tell the regulator about them, including (or perhaps especially) the really expensive and embarrassing ones.
All licensees must accept every obligation that comes with the licence and comply with all of them, because self-licensing cannot be allowed to become the place advisers go to escape from the supervision they found inconvenient somewhere else.
A licensee has to be financially resilient, and that is discussed in Recommendation 12 of the Financial Services Council’s White Paper on the Future of Advice Licensing. But the paper notes that capital requirements alone would not have stopped the behaviour that led to around $1 billion of losses in Shield and First Guardian, which shifts the spotlight back onto intent, attitude, philosophy and so forth.
Owners must be stopped from phoenixing a licensee when it fails and must be answerable for consumer losses caused by advice failings rather than being allowed to walk away from them. And client interests have to sit ahead of everything else, because that is one of the things that separates a profession from a distribution or sales channel.
A licensee that meets all four should keep its licence no matter how small it is, and a licensee that does not should lose it no matter how big it is.
Simple and measurable
It’s tempting to think about funding levies and other financial tools as a way to regulate the licensee space because they’re simple, and measurable. Monitoring and regulating behaviour is of course much more complicated and time consuming, which is why a closer focus on non-financial issues and on the consequences of failure is warranted. But there’s little confidence across the sector that ASIC is adequately resourced to do that, even if were to regard supervision as its job, which it doesn’t.
None of the 19 recommendations in the FSC white paper, however, goes to who is personally accountable when a licensee’s compliance systems fail, and that’s as true at the big end of town as at the small.
Sean Graham of Assured Support wrote in Professional Planner on 4 August that “a licensee is a legal entity, not a real person. It doesn’t read compliance reports, investigate misconduct or decide whether to terminate profitable advisers. People do.”
The Principals’ Community, which supports 144 self-licensed advice businesses authorising more than 1535 advisers, makes the same point in its response to the white paper.
Major advice failures “have repeatedly demonstrated that systems alone are not enough when accountable leaders do not act on warning signs”, the response says, and effective supervision “must therefore place clear accountability on the people who make, oversee and implement decisions, and ensure they are held to account when failures occur”.
Consolidation by cheque book
Recommendation 11 of the FSC white paper asks Treasury to rejig the ASIC advice levy so that the fixed licence-level component rises materially and the per-adviser component falls.
Padua Solutions data in the paper, as at July 2026, counts 1866 AFSLs with at least one registered adviser, a further 577 holding a licence with none, and 15,023 advisers. Currently the levy sits at $1500 per licensee and roughly $2300 per adviser. Option A in the FSC paper would shift the burden to $25,000 per licensee and $1700 per adviser, while Option B would shift it to $40,000 and $500, respectively.
It may not be the FSC’s explicit aim to slash the number of licensees, but its modelling acknowledges that it’s an expected consequence of its proposals.
Option A includes an assumption of a 15 per cent fall in licensee numbers “due to consolidation or closure”, and Option B a 20 per cent fall.
A note in the report the observes that the real cost of the supervisory uplift is likely to be lower than forecast because licensee numbers “may decrease due to consolidation or closure, because of the additional cost imposed on a per-licensee basis”.
Several hundred licensees might leave the market if the burden shifts to them, and maybe a good number of them should. But marking those for the drop based on size rather than by behaviour presents some real problems.
A two-adviser self-licensed firm currently pays about $6100 a year ($1500 plus $2300 twice) and would pay $41,000 ($40,000 plus $500 twice) under FSC Option B, a more than sixfold increase; while a licensee with 100 advisers currently pays about $231,500 ($1500 plus $2300 one hundred times) and would pay $90,000 ($40,000 plus $500 one hundred times), a reduction of about 60 per cent.
Competition falls, consumer choice narrows
The Principals’ Community managing director Kon Costas notes in an article published in Professional Planner today that that large licensees “can generally spread fixed regulatory costs across a broader base” while “smaller self-licensed businesses often have far fewer opportunities to absorb or share those costs”, with the result that competition falls, adviser and consumer choice narrows, and the market concentrates further.
A well-governed two-partner practice with a clean compliance track record and 30 years of strong client relationships is at risk of being driven out, while a well-funded licensee running a conflicted distribution model and treating its obligations unseriously can afford to remain in place.
The licensees that should remain are those that find their own breaches and report them; hold enough capital to make good on their own mistakes; whose owners, including parent entities, are on the hook when things go wrong rather than free to flee and start again; and which put clients ahead of the licensee even when doing so is expensive.
Done properly, self-licensing works as well as any other model and in some cases arguably better, because the license owners and the advisers are the same people and there is nowhere to hide.
Done badly, it is exactly where someone would go to hide. It explains why small licensees so infrequently self-report breaches to ASIC and it plays into the narrative that all small licensees’ compliance is substandard.
The sector knows the difference between good and bad licensees, and so does ASIC. The bad ones should be weeded out.
What is missing in the conversation at the moment is the willingness to say out loud that fewer licensees is an explicit aim, to name the ones that should go and to act on it, instead of hoping a levy will quietly do the job of shutting down the bad ones, at the cost of taking a few hundred good ones with it.
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