Thinking about getting your own AFSL? Four important questions to consider

Here are the four most important questions to consider when thinking about getting your own AFSL.

Question 1. Why do you want your own licence? Is it a natural progression for your business or more of an emotional lever?

This question is what I would consider being the most important as it can separate an emotional decision from a considered decision. With many financial advisers choosing to assess their current situation and potentially branch out on their own, the reason why is often a critical piece in the puzzle. By this I mean, are you running away from stress, pressure, and growing dissatisfaction that is directed at your current licence, when that same stress, pressure, and dissatisfaction may well follow you into your own AFSL? It might simply be the manifestation of mounting regulation, education requirements, changing industry dynamics, and the burden of being an adviser, generally, that is causing the duress?

Alternatively, are you considering your own AFSL to carve out your personal new beginning, implement your preferred business model, create a culture of your own and enjoy the flexibility, creative freedom, and overall satisfaction that building your own AFSL can bring?

The latter is a considered decision and one that many often make in conjunction with a plan to re-set their business, overhaul their pricing, implement better efficiencies in their processes and frameworks and prepare their business for an upward growth trajectory.

It is akin to building an empire and being able to look back and absorb the satisfaction from what you started, from nothing.

It is worth checking here which side of the equation you are on, as emotional decisions are often just short-term reflex actions, but they have the power to drive everlasting change regardless of their merit.

Question 2. Does your practice have the operational and administrative maturity to manage your own AFSL? Scale here is your friend.

Have you scoped out the support you might need in your new AFSL? By this, I am referring to the support and services that are often provided by your current licence, but can often go unnoticed. I’m talking about the smaller queries that arise when things don’t go to plan i.e. brokerage/account reconciliation questions, billing errors, staff CPD records/missing CPD certificates, software hiccups, webinar, and PD day management, and all of those queries that might be answered by your dealer group’s admin, payments, education and plan check teams that you don’t have readily established when you transition to your own AFSL.

It is by no means a deal-breaker, but the absence of such support is usually most felt by smaller practices that don’t typically have the manpower to wade through paperwork for answers. As you grow scale over time, this certainly changes with a larger complement of able staff.

So, having your own AFSL means that scale is your friend. It is imperative to assess upfront, what operational and administrative support you need and intend to appoint internally, as it will provide you with much-needed business frameworks and leverage to remove burdens that might otherwise weigh on your support staff.

Note there is clearly a cost here, so also assess and plan the level of scale your business needs to generate, to afford a meaningful level of in-house support before you take your AFSL leap.

Question 3. Are you prepared to recognise and pay for the support you need? This requires blatant honest self-assessment and a budget.

I cannot stress this one enough. I believe you must factor in external support that keeps your business’ bigger picture and overall planning on track. This type of support is practice consultancy support and guidance. This involves adopting tools and inviting external discipline and rigour to ensure you have a workable and current business plan in place.

It also incorporates support that drives you to segment and price your clients according to the level of time and/or complexity they represent to your practice and ensure you understand your sense of purpose and ultimately run a profitable and sustainable AFSL. Think of this support as a business coach. This type of support in my experience is critical to newer AFSL’s in particular, and/or those that haven’t yet grown their scale to a sufficient level to remove the burden of managing everything solo. This type of support can also alleviate hours of weekend work and the fatigue that comes with a work/life imbalance.

It is also often what separates a profitable business model from those that impose stress because of rising costs and margin pressure.

Practices that understand their client target markets, generally charge their clients more appropriately for the services they provide, and generate a more profitable and sustainable business – and yet it is the one area I find, most practices still choose to ignore.

So, don’t be afraid to reach out here and seek out the support you need, the cost is worth the effort.

Question 4. What is your end game?

This is not only a question for you to ponder, but is also an observation of the end result of what I have seen working with many self-licensees’ very individual and unique journeys over the years.

I can happily attest that despite all of the industry disruption, regulation change, and frustrating business conditions that have been endured, that many of the most positive practitioners I have come across over the years have belonged to the boutique, self-licensed segment of the market. I may be wrong, but I have always gotten a sense that their drive, diligence, and accountability that is extended to not just their clients and the advice they provide but also to their business planning and AFSL management has meant they understand their sense of purpose.

So perhaps this is ultimately what your own licence brings? Along with the chance to look back in satisfaction at the successful business that you have built, and the culture that it represents.

Think about what your end game is and own it. It will make the challenges, the accountability, and the ongoing stewardship much richer.

Jill Tunkin, national practice consultant for AFSL support services, Lifespan Partnership

Neil Griffiths

Neil is the Deputy Editor of the wealth titles, including ifa and InvestorDaily.

Neil is also the host of the ifa show podcast.