Group expresses concerns with rapid growth of self-licensing trend

While the Association of Independently Owned Financial Professionals (AIOFP) supports the current licensing regime and believes there is ample room for both the Dealer Group model and self-licensing of individuals, the group has raised concerns about the potential strain on taxpayers if the current self-licensing trend continues.

Last year, an Investment Trends report revealed that 37 per cent of advisers plan to leave their licensee in 2023, of which 70 per cent intend to go self-licensed.

Although the AIOFP strongly advocates for offering consumers and the industry a wide range of choices, its executive director, Peter Johnston, recently shared with ifa that self-licensing creates challenges for advisers, regulators, and member groups.

Despite the potential benefits of having the freedom to choose, the AIOFP recognised the difficulties that arise with self-licensing.

“We don’t think taxpayers will be happy if ASIC needed to employ thousands more public servants to manage circa 14,000 additional individual AFSL holders,” Mr Johnston said.

The AIOFP’s stance comes as ASIC is reportedly processing AFSL applications within seven weeks, encouraging many advisers to venture down the self-licensing path.

Mr Johnston emphasised that Dealer Groups play an important role in monitoring adviser behaviour and have a commercial interest in ensuring advisers act diligently and in the best interests of their clients.

“This relieves some of the pressure on ASIC to monitor behaviour,” Mr Johnston said.

Moreover, he assessed that associations should not become quasi-regulators and hand out penalties for poor behaviour.

“That should be left up to ASIC/AFCA and the courts,” he said.

“The only roles associations should have are referring poor adviser behaviour to ASIC and acting in the best interests of its members, consumers, and the industry in general”.

Mr Johnston also identified several pressing issues for those who chose to go down this path, including scale, isolation, and finding new client opportunities.

Namely, as a new entrant, or someone who has been licensed to a large dealer group, AIOFP explained that it can be difficult to connect with like-minded professionals and obtain critical services such as professional indemnity (PI) cover, Continuing Education Program (CEP) solutions, and IT/software support.

“Venturing into your own stand-alone business space can be an intimidating experience,” Mr Johnston said.

Late last year, chief executive of Lifespan Financial Planning, Eugene Ardino, told ifa that with many advisers seeking to be in control of their own destinations when it comes to compliance and technology, self-licensing will continue in 2023.