Crossing the bridge – ready or not?

There is a lot of information out there about becoming self-licensed so you will need to invest time in research.  No way around it. The Australian Securities and Investments Commission (ASIC) has a list of licensee obligations which may be a useful starting point and prompt some questions.  Some of these may include:

As an AFS licensee, what would my ongoing obligations be?

How would I meet these obligations? (e.g. administration, risk management, compliance)

What are the tasks I would need to do daily, weekly, monthly, annually?

What arrangements would I need to have in place to make sure I comply with these obligations? (e.g. resources, systems, processes, procedures)

How can I ensure I remain compliant? (What checks and balances do I need?)

What happens if I’m audited by ASIC?

Who do I need in my ‘team’ to help things run smoothly?

Should I use external providers in the application process/to provide on-going services, or an end-to-end solution? And how much will it cost?

On that last one, there are a couple of different perspectives.  It’s unlikely you will have the skills, or capacity, to fulfil everything that’s required and still remain compliant.  So, depending on what you can bring to the table, you may choose to outsource and fill the gaps that way. For example you may choose to outsource legal, HR, IT support or accounting/auditing functions.  However, in my mind, there’s a big ‘but’ here.  

Using external providers weakens the integrity of the process and may open your business to increased compliance risk.  This is because the more people involved (i.e. different sets of hands) the greater the chance that something can go awry.  How can you be sure that everyone, inside and out, are on the same page, with the same purpose, perspective and process? Basically it could mean the chain of consistency is broken and that spells trouble when it comes to compliance.  Ideally the fewer hands involved the better – from the application process to servicing – otherwise false assumptions and second guessing may occur. 

Ring-fence your risk

We know the main reason advisers choose to self-license is to control their own risk.  Therefore, leaving yourself open to risk is counter-intuitive. The aim should be to reduce uncertainty by controlling as many unknowns as possible.  Having all the licensee solutions in one place is one effective way to achieve this. An end-to-end process means: you don’t have to spend time outsourcing the services for the skills you lack; provides consistency and reduces compliance risk; provides a single point of accountability or source of truth; and the reassurance of a complete audit trail.  Another upside for advisers – more time with clients.

So if you’re currently wading through the pros and cons of becoming a self-licensed adviser, please take your time.  There is no rush. You need to own the decision, no one else can make that decision for you. If now is not the right time, you can always revisit your decision down the track.  Everything in your life really needs to line up…so you’re ready to cross that bridge.  

As part of your information search, you may like to see what LaVista Licensee Solutions can offer.  This includes an off-the-shelf package with no outsourcing.  

Mike Pope is Chief Executive Officer of LaVista Licensee Solutions. He can be contacted at [email protected].