Are licensees overpromising and underdelivering to advisers?
Commentators have discussed whether licensees are providing enough value and support to their advisers for the high price tag, prompting some to consider the self-licensing route.
In the world of financial advice, there are a multitude of responsibilities for an Australian Financial Services licensee (AFSL) and the support they provide for their practices and advisers. This can range from compliance support and training tools to approved product lists and investment assistance.
But this comes at a steep price for the adviser or practice as estimates indicate that licensing fees can range anywhere from $40,000 per annum to $75,000, depending on the number of authorised representatives within a practice.
As these fees rise and the advice market becomes an increasingly complex regulatory environment, there are questions raised as to whether AFSLs are stepping up enough to justify the price.
“People are getting frustrated with licensees. Some advisers feel they aren’t getting value for money. Licensee fees, like everything else in this world, are going up and it’s certainly a lot more than what it was 10 years ago,” Jamie Ramsey, founder and principal consultant at Advice Business Consulting, told Money Management.
Ramsey noted that many advisers are contemplating whether their licensee is charging a reasonable amount for the service they are providing, with some feeling disappointed when their licensee overpromises and underdelivers.
“There’s a lot of promises that licensees make that they aren’t delivering on, and advisers remember that stuff. This becomes [an issue] when advisers don’t feel like they’re getting the value and support that they need,” she said. “Licensees really have to look at not just what they say they do, but what they actually do, because people are asking: ‘They’ve promised me all this coaching and support, but am I getting it?’”
Daryl Stout, national business growth manager at AMP’s self-licensed offering Jigsaw, observed that certain AFSLs are “offering little value”.
He explained: “‘We will leave you alone’ is the catch-cry of some licensee groups – low cost is okay, but low value is not acceptable in our profession.”
Speaking with Money Management, Stout believes this is due to cost reductions made by some licensees to deliver their limited services at a particular price point. In a competitive marketplace, some AFSLs may look to provide a cheaper offering to attract advisers, but this can come with the adviser receiving fewer resources as a result.
He said: “This may appeal to a number in our industry who do the right thing but feel overwhelmed by the pace of industry change and the emotional impact of industry transformation.
“More work is needed to build understanding among advisers around how a licensee value proposition can support growth, attract and retain clients, assist with business efficiency and profitability and business valuations, while at the same time providing an appropriate governance structure and encouraging professional development.”
Similarly, Adam McGuren, national manager at The Principals’ Community, which supports self-licensed financial advisers, said he has been told some advisers feel they have “outgrown” their current licensee, prompting them to consider going down the self-licensed route instead.
“We hear from many advice businesses who say they have ‘outgrown their current licensee’, especially those with larger businesses, where they feel they are contributing more than they are gaining in return,” McGuren said.
“While they value the support received over the years, the appeal of their own licence lies in the ability to operate more efficiently and make strategic decisions quickly, free from a one-size-fits-all licensee framework.”
Money Management previously examined the cost-effectiveness of running your own licensee and whether the expenses are worth the benefits it provides. Costs aside, the key reasons that advisers open their own AFSL often boils down to the desire for freedom and flexibility.
McGuren continued: “Within The Principals’ Community, we see that one of the key benefits is access to collective knowledge and experience which comes with a very large network of high-achieving wealth management businesses, which can be invaluable for prospective self-licensed businesses.”
Echoing this sentiment, Stout identified that one of the top characteristics that advisers seek from an AFSL is “access to a great community” to learn and exchange ideas with others.
Regardless of whether they remain with their existing licensee or go self-licensed, McGuren encouraged advisers to consider what will provide the best value and support for them.
“It’s best to look at the licensed versus self-licensed lens not from what it costs, but what’s going to deliver the best value to their business and clients,” he said.
“Capacity, capability and the right support is key to successfully running and managing the obligations of your own AFSL. Get the right advice to ensure it is the right thing for your business and its future.”
AUTHOR
Jasmine Siljic
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