Integrity Compliance director Rhett Das has a pretty simple message to advisers thinking of setting up their own AFSL: don’t do it unless you’re really into details.
Das has worked with numerous advice businesses looking to self-licence and in some cases, they were simply unaware of the amount of paperwork involved. Speaking at the 2018 Financial Planning Association Congress, Das said that even at the application stage, there’s a pretty heavy admin burden.
How to apply
At the outset, you’ll need to provide multiple documents including a business description, a table of organisational competence, financial statements (profit and loss, balance sheet and cash flow projections), references and potentially other proofs if you, for example, want authorisation to trade in derivatives.
The other thing? There’s no set timeline for approval even if you get everything “right”. While Das said he’d seen applications progress in a matter of weeks – he said this was “almost unheard of” – the majority will take up to six months.
“If someone tells you they can set you up with your own licence within a set timeframe,” he added, “they’re probably lying to you.”
Responsibilities
Das said one of the key positions at any licensee is the responsible manager, who oversees day-to-day matters pertaining to the licence – but also operates as the “heart and soul” of the business.
That could be you or someone else, but either way Das said the RM needs to have both a stake in and a detailed understanding of the business.
“I’ve been asked to be RM for a number of licensees,” he explained, “but I’d only do it if I was officially working there for at least one day a week. ASIC has said one of the primary causes of breach reports is an improper RM framework, so it’s vital this is done properly.”
The hard sell
Ultimately, Das said that numerically speaking, “there are more negatives than positives in self-licensing.”
Negatives included: the time spent running a licence could detract from time in front of clients, increased costs, the burden of risk shifting entirely onto you and a sense of loneliness as it’s a much smaller community.
For some advisers, though, the positives are worth it: namely, flexibility and control over your investment philosophy and not being “dragged down” by someone else’s misconduct in a larger licensee.
Either way, though, remember: the devil’s in the detail.
