“No one ever got fired for buying IBM” was a well-known marketing phrase followed by computer hardware purchasing managers in the 1980s. It didn’t matter if the alternative was faster or cheaper; they wanted the comfort the IBM brand gave them.
Likewise in advice, there will always be consumers who want advice from an advisor tied to one of the financial institutions. They want the comfort of a strong brand and accept that they will be placed into that institution’s platform and products.
If you feel comfortable in this market segment and it’s right for your clients, then seeking your own AFS licence will never be right for you.
Is independence important?
Independence is an incredibly uplifting word because in one powerful word it conveys so much.
For clients, independence means being able to afford what they want to do when they need or want to do it. It means you can live your dream lifestyle and it means you are able to provide all the opportunities you can to your family.
On the upside side it reminds us of freedom, peace of mind, confidence and control. On the downside, a lack of independence fills us with a sense of uncertainty, a sense that we are exposed to conflicts that can work against us.
In the advice world, independence is a strictly regulated word that only a small number of financial planners qualify to use.
Know your clients
Finding qualiﬁed, independent ﬁnancial advice should not be difﬁcult. But it is for many hard-working Australians. This lack of choice that consumers face in seeking independent financial advice does them a large disservice − they deserve far better.
When we spoke to our clients many of them told us they had a higher level of trust in our advice because they knew it wasn’t tied to any institution in any way and because we had severed the link between our remuneration and our advice.
Taking the time to understand what is important to your clients and learning what they value in your advice is a great exercise.
In 500 BC the words 'Know thyself' were carved above the entrance to the Delphic Oracle. The ancient Greeks knew the importance of understanding your own strengths and weaknesses in living a successful life.
So before you consider the journey towards independence, answer these questions:
• Is independence important to me? Why?
• Is independence important to my clients? Why?
• Am I organised enough to manage my own AFS licence?
• Do I want to manage my own AFS licence?
What sort of ship do you run?
Only you truly know your core skillset when it comes to running a successful practice. You may be great at dealing with clients but weak at the administrative side of your business.
It’s a similar comparison to whether a client should have an SMSF or not. If you know the client is disorganised, tardy with paperwork and lacks an attention to detail, then it’s unlikely you will recommend them to set up an SMSF.
Conversely, if they have experience in running a successful business, are up-to-date on all their paperwork and are well organised, an SMSF could be their perfect retirement savings vehicle.
Likewise, if you run an efficient business and you are on top of all your administration then likely you’ll have no problem running your own AFS licence. Don’t let anyone scare you about the work and commitment involved in running an AFS licence.
Be mindful that some people have a strong financial interest in scaring you – they want your business.
Licensees tied to institutions will tell you that it’s all too hard, too costly and too time-consuming to get your own licence. All you need to do is sign up with them and shift all of your clients across to their platform and to their products.
Licensees who call themselves 'independently owned' come with a similar agenda. They will seek to convince you that seeking your own licence is near impossible.
Sure, there is serious work, time and effort involved – it’s similar to the onerous yet completely manageable conditions of running an SMSF.
Getting your own licence
If you are interested in seeking your own licence, then seek help as you undertake the journey.
Service providers: There are a raft of service providers out there who specialise in assisting financial planners get their AFS licence. Many are good at what they do and provide their services at a reasonable price. I leave it to you to decide whether this is the right approach for you.
Compliance outsourcing: Once you have your AFS licence, many licensees choose to outsource aspects of running their licence to experts. Compare some quotes from a few and try to speak to some of their existing clients to gauge the level of service you will receive.
Tim Mackay, principal, Quantum Financial