Financial planning is already one of the most heavily regulated industries in Australia, with a raft of legislation, regulation and other compliance obligations for planners. Getting and keeping an Australian Financial Services Licence (AFSL) is a significant undertaking, and I sometimes hear (from vested interests) that financial planning practices should get their own AFSL. I think this would be a mistake for many practices.
An AFSL can destroy the value of a small financial planning practice. Meeting the compliance requirements of an AFSL is an onerous task, so a financial planner can easily spend all of their time trying to comply with the AFSL and worrying about this. In the process, they can take their eye off the business of financial planning.
There are many disaster cases where financial planners went out and got their own AFSL, but didn’t realise how much time and effort is required to keep it, and this created a real mess for their practice. The last thing a financial planning business needs is distraction when they should be focusing on building value and creating a great practice that someone will want to buy.
Big advice businesses need their own licence, and given the industry trend towards consolidation, any firm that is likely to buy your financial planning business one day has probably already has a licence (or can easily go and get one). Financial planners don’t need to be distracted by onerous legal and regulatory obligations. They need to be free to do what they can do best: delivering good advice, good service and good value. As long as you can do these three things, you will always have a business that someone will want to buy – no-one wants to buy the long tail liability of an AFSL when a “clean skin” licence is readily obtainable.
