Why is self-licensing an attractive option?

The proportion of financial advisers who are self-licensed has increased from around 17 per cent in 2017 up to 31 per cent in 2022, according to Investment Trends. Of those who are looking to leave their current licensee, 70 per cent said they would become self-licensed rather than move to a different licensee.

Speaking on a recent episode of the ifa podcast, Tony Mantineo, head of Lifespan Partnership, said that the uncertainty that can come with being tied to a dealer group, particularly as a large number are involved in mergers and acquisitions, has contributed to the trend of advisers self-licensing.

“We’ve seen a lot of change in licensee world and in recent times, mergers and acquisitions of licensees, and that sometimes creates uncertainty and instability,” Mr Mantineo said.

“Some businesses feel that if they can’t control the dealer group’s destiny, maybe it’s time they control their own destiny, hence why they look at getting their own licence.”

He relayed the experience of an advisory business that had seen its dealer group shunted around from one institution to another before switching to a non-institutional dealer group that was subsequently also sold.

This experience, Mr Mantineo said, highlights the instability and insecurity that advice firms can feel when working under a licensee.

“The reason why they’re attracted to self-licensing is because it gives them autonomy and control,” he added.

“They feel that they’re well resourced, they’ve got the right personnel and internal processes and systems to run their own AFSL. But some businesses also believe that it’s going to reduce costs, and we find that’s not the case.

“So, it shouldn’t be the prime reason for going self-licensed. But I have seen businesses merge their businesses to save cost and utilise resourcing that sits underneath that can work from where I sit.”

Importantly, Mr Mantineo added, there are also a lot of avenues that small AFSL holders can go down for support.

“From what I’ve seen, a large portion of smaller AFSL holders, at least initially, do not seek external support services like us. In many cases they do not know we exist,” he said.

“And when they are aware of it, they don’t know how to position it and how to use it. So, from where I sit, I find that once they find out the work involved, they become overwhelmed. In terms of the governance and compliance requirements notwithstanding, in many cases they’re the responsible manager, they’re the CFO, the CEO and the adviser. Juggling all those responsibilities aren’t easy.”

Mr Mantineo said that this complexity extends from the initial “onerous” application process, all the way through to finalising their documentation, such as financial services guides and privacy statements.

“It’s important, in my view, they’ve got to partner up with someone to give them that guidance and support and it’s more practical, I believe, if you do that on a one-on-one basis, which we do for our new AFSLs,” he said.

To hear more from Tony Mantineo and Lifespan Financial Planning CEO Eugene Ardino, tune in here.