Episode 3: Self-licensing: Is it right for me? [FPA Podcast]

16 July 2021

Money & Life team

Money & Life contributors draw on their diverse range of experience to present you with insights and guidance that will help you manage your financial wellbeing, achieve your lifestyle goals and plan for your financial future.

In this episode of the FPA Podcast, Ben Marshan, Head of Policy, Strategy and Innovation for the FPA is joined by Nadia Docker of Kinetic Compliance and Sean Graham of Assured Support to discuss self-licensing practices and whether it’s the right move for you and your practice.

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Episode Transcript:

Ben Marshan:  

Hi, everyone. I’m Ben Marshan, the Head of Policy, Strategy, and Innovation at the Financial Planning Association, and this is FPA Podcast. Today, we’re going to talk about self-licensing, is it right for me? And this is a conversation with Nadia Docker from Kinetic Compliance and Sean Graham from Assured Support. We’re going to explore whether or not self-licensing your AFSL is the right move for you, for your business, and some of the considerations you need to think about in considering whether or not you move to a self-licensed option or whether or not you stick with your existing licensee. We’ll be talking about capacity and capability. We’ll be talking about laws and regulations. But one of the most interesting parts of this conversation is the conversation we have about community and where you can find communities of other self-licensed practices who can help you. So I hope you enjoy today’s podcast. Thank you.

Ben Marshan:  

So today, we’re going to talk about self-licensed practices, and is self licensing the right move for me and my practice? There’s a lot of change going on around the profession obviously, and what we wanted to do was just to have a quick conversation about what the process of self-licensing yourself was. But what I really want to focus on today, and we’ll get into that conversation probably in the second half, is what do really good self license practices look like? What are they doing differently? What makes them tick? What makes them work really well? So just to kick things off, Nadia, in terms of the process of becoming self-licensed just quickly, what’s the process people have to go through?

Nadia Docker: 

Thanks, Ben. I guess the first part of the process is really about deciding whether going to self-licensed is the right thing for you to do. And I always like to start that with a pretty frank and open discussion around what the motivation to do it is, to talk about the cost considerations that come with being self-licensed, also talking about the capability of the people that are going to put themselves forward to be responsible managers of the license. It’s important to understand how you’re going to structure the new AFSL as an entity. Also, we need to know the number of representatives that are going to come in under a license, whether it’s going to be a sole trader, whether it’s a number of businesses that are coming together to start their own AFSL. Which can cause its own challenges, which we’ve seen in the past.

So I guess it’s a really very personal and individual decision to make, and then once we’ve had that discussion and the client or the advisor has had a chance to think about whether they want to go ahead, then we start the process around data gathering and information and setting up new companies, doing the background checks, business references, et cetera, to get the application ready to submit to ASIC.

Ben Marshan:  

And, Sean, the application process is quite lengthy and intense from my experience of doing license variations and having a look at license conditions and things that. How long does it take? How big a process is it?

Sean Graham:  

One of the interesting things about the license application itself is it’s so dependent on the business itself and what they’re trying to do. So we’ve seen some go through very quickly. And when I say quickly, 8 to 10 to 12 weeks. But what we’re seeing in 2021 is, it’s slowed down. Whether ASICs internal resources, or the increased checks they’re actually putting in place, there’s a lot more focus now on controlling entities, conflicts, and so ASIC seem to be taking a bit more care with the applications now. So it’s a much longer process than it was last year, and every year it seems to just get longer and longer. Now that shouldn’t dissuade those businesses that want to do it, but it’s not something you’re going to be able to decide on a Friday afternoon and get your license by Monday morning. It’s incredibly complex, particularly when you build in the transition of your old license, if that’s what you want.

Ben Marshan:  

Do you know, what’s ASIC looking for that’s taking longer? Or is it just because they’ve got so many more applications in the works?

Sean Graham:  

I suspect it’s a combination of a number of different things. I think they’ve got more applications in there. They’ve got a lot of businesses leaving institutional licensees, and they’re all being set up and having to go through that process. The transition process itself, at the moment ASIC are reluctant to grant the license for a new business where the RMs are authorized representative’s another licensee. So again, the grant of that license is often held back by the transition process of the old licensee. But they are spending a lot more time really drilling down into, not just the formal competencies of the big [one table, but in the new license, what are they going to be doing with their new license?

So we know they’re advisors. We know they’ve given advice over a long period of time in all those classes about the formal competencies to support the authorizations. What are they going to be doing in the new AC? And if they’re going to be the head of finance with experience to demonstrate they can do that… So they are spending a lot more time drilling down, they’re spend more time looking at the character and competence of the people putting forward as RMs, and they take a lot more time to look at that relationship piece. Who’s actually controlling that entity? What parties and shareholders? And in some cases it can be incredibly complex, because there are some applicants who don’t really understand the tax structures that they’re against put in place when they start the application processes and stuff.

Ben Marshan:  

Thanks, Sean. And I think that touches back on a point you made a minute ago now, that capability is probably a really important factor in that decision to become self-licensed it sounds like from the regulator’s perspective. The capability of the people that are in the business and their roles is really important. Is there anything in particular people should be thinking about from a capability perspective in terms of… The reality is every financial planner is the world’s best financial planner. What makes them capable to run their own licensee and do that on top of being a financial planner?

Nadia Docker: 

Yeah. So I guess typically, the advisors that we see applying to be responsible managers go through the experience requirements. So that means that they need three out of the last five years in the areas of authorization that they are seeking. So they usually get through with no issues around the main areas of advice, the super investment and the insurance piece. But occasionally, they’ll have a couple of outlier clients that might have marginal lending that they’re not able to get authorization for because they don’t have that experience that will get passed ASIC. The other thing that they also need to consider is, if you are going to be a sole RM or whether you’ve got two RMs coming into a license, whether there’s going to be a key-person condition applied on that license as well.

And that’s a really important consideration for anyone thinking about going self-licensing. Because if something does happen to that key-person RM, the AFSL is unable to operate for whatever reason, whether it’s due to health or other issues that they’re taken out of the business for an extended period of time. So we do try to de-risk that aspect of putting forward RMs, trying to get at least two if we can. But as well, we’ve got plenty of clients that we work with that are sole-trader RMs. So it’s probably the experience piece is the main one that you need to demonstrate to ASIC through your business references and your qualifications. And they’re also looking that the RM will be meeting the FASEA educational requirements by the end of 2026.

Sean Graham:  

I’ll just add something there, Ben, is that one of the biggest challenge is, every financial planner is the best financial planner. And they’re all awesome, except that it’s a given. But there’s a very great difference between being a financial planner and running a license, in that all the things that they used to just abdicate responsibility for that was handled by someone in head office, or everything from the finances to the documentation to the systems, all bits and pieces that traditionally the licensee have done and generally not got much respect for doing it. It’s suddenly become their responsibility.

And there’s a big there’s a steep learning curve from taking the theoretical position. So they’ve read the regulatory guides or read the regulatory guides 104 and 105, explained to them what an RM means, to having the reality of actually being in a business, being in a license, and being responsible for those types of things and operationalizing that. This is where the biggest gap is. So wat we tend to see is, you either get the guys… I’m using that in a non-gender specific way… But you get the guys who come from big institutions, and they’re one main bank and they’ve got risk framework that covers international counterparty risk and everything on down, which is 5000 different elements.

They’ve got an obligation to risk register, but they can’t possibly manage better than 40 people because they that’s what they’re used to. And they’ve got other guys who then start their license and then try to build it from scratch themselves. And again, we’re seeing this across the board that operationalizing any type of theoretical knowledge is complex. And if you don’t know what you’re doing when you start, you can get there, but it’s going to be a very torturous and expensive journey to learn as you go. Plus, there are a lot of consequences and liabilities if you get it wrong.

Ben Marshan:  

Thanks, Sean. And I feel that’s a great point, and I’m eager to explore that a bit more in as that you can be a phenomenal financial planner. You can be phenomenal at running a business. You can be phenomenal at being a responsible manager and running your own licensee. It’s very hard to be phenomenal at all of those three things at once. And so getting back to this concept of what do really good practices who are self license do, how do they handle each of those roles and each of those needs to be really, really good at so that you’re running a really good self-licensed practice?

Nadia Docker: 

I’m happy to start taking that one, if that’s okay. I think simply, and Sean’s probably going to agree with me on this one, it’s outsourcing. Outsourcing what you’re not good at and recognizing that there’s a different skill set to AFSL compliance and the monitoring and supervision aspect in day-to-day running of an AFSL versus actually been an advisor. Most of the people that we work with are predominantly advisors, that’s what they want to be, that’s their passion. And they don’t want too much of their time taken away from that role, because they want to be there for their clients. And it takes an enormous amount of time to get your head around all the regulations, the Corporations Act, regulatory guide, information sheets, consultation papers. You guys know what I’m talking about.

And it’s not really something that is spare five minutes in a day. You really do need to dedicate some time and resources to it. So I think that the practices that we work with probably have a completely separate budget to bring in certain experts, whether it’s compliance experts, whether it’s business coaches, to help with the running of the business in the AFSL. They’re obviously outsourcing their IT. Their outsourcing functions HR, just so that they can focus on doing a really great job for their clients, first and foremost. But then also having that peace of mind in the background that there’s people around them that can support them, and making sure that they are meeting their regulatory requirements at the same time. It’s almost like having somebody just come in as project manager AFSL and do some of that heavy lifting for you.

Sean Graham:  

The only thing I’d add there, Ben, is that if you’re going to transition from being an advisor to being self-license, the first thing is to understand risk. This is where they really need to… And they need to be comfortable with the level of regulatory and legislative risk they’re taking on. Because when they’re advisors, they’re told if the margin on the SLA is wrong, it’s going to be the end of the world or whatever and that whole range of scaremongering that they’ve been subjected to over a long period of time. But when they get their license, one of the things is there going to be able to separate the noise from their real obligations. But they’ve got to understand that those obligations have force. They’re not just theoretical things that somebody else has to deal with. It’s there.

And when you’re self-licensed, the other thing to remember is that quite different to institutional licensing is your clients’ own instructions, right? So there’s a direct personal relationship, and your reputation and your livelihood is inextricably tied in to the performance of that license. So you’ve got to be comfortable with that changing circumstance. And you’ve got to understand that when you’re self-licensed, you are never going to be an advisor or purely an advisor. Whenever they become self-licensed, they’ve got this idea that I’m going to do that and a little bit of the other bit. And what you find is nature abhors a vacuum, right? So it’s the same principle is that you get your license, and then compliance, legal, and whatever else, just takes up more and more of your time.

So you’ve got to be comfortable with it. And to Nadia’s point, if you want to balance it, you want to have some type of advanced compliance or management balance. You’ve got to have really strong processing procedures in place and really capable people. It doesn’t matter whether they’re external or internal, but you’ve got to have the right people. And this is the other thing that financial planners, when they become self licensed, at the same time ASIC’s looking at you and saying, “Are you an appropriate person to be responsible manager?” The principles in that practice should be looking at their team and going, “Are these the right people to run a license?”

Because when all the risk is on you, and you’re carrying the balance sheet and you’re doing license, you need to make sure that the business is well put together. And this is where sometimes you need business coaches to come in. This is sometimes where you need to have a good, hard look at stuff and go, “I need somebody else to come in and manage the practice. Or I need somebody else to come in and take over accounts, because we just don’t have that capability.”

Ben Marshan:  

Thanks, Sean. So is there a good way to… It’s an all or nothing proposition, right? So you’re either working under somebody else’s license or you’re self-licensed. Is there a good way to start to figure out whether or not making that that journey and that leap and that step is the right process? Because for a lot of our members, they want to be really good, professional financial planners. Their passion is to help their clients. Their frustration with licensing is often the restrictions and the prescription around how they provide advice. To your point, Sean, all for very good reasons around how do we mitigate the risks of this incredibly complex and difficult ecosystem of regulators and laws and professional standards that we operate in? So if somebody is starting to think about this process of becoming self-licensed, what’s a good way to start exploring whether or not it’s actually right for them and for their business and to start figuring out whether or not I’m going to take that leap and take that risk?

Sean Graham:  

I think you’ve identified what the real issue is there, because the environment in which they can operate is so complex and so frequently changing and so highly regulated and highly visible. One of the things they should look at first and foremost is how they approach their own professional development, right? Because if they’re on top of their professional development, always learning and always eager to learn stuff and do stuff, then they’re probably going to be okay running a license.

But if they’re an advisor that’s got to be pushed every year to do the 40 hours, to do their training, to attend PD days, then you’re probably not the right person. And employment or authorization from another licensee is probably a better option for you. What you do when you get a license is, you’re going to be continuously evolving your thinking, your business. You’re going to be revising things. How many times at the past couple of years have we seen licensees have to completely revise something they did seven years ago and deal with the consequences of that?

So unless your attitude’s right, unless you’ve got that discipline to be able to put things in place and the willingness to change things, and to Nadia’s point, your willingness to bring the right people to the table and take advice because that’s one of the missing pieces… They’ll often engage advisors, compliance people, whatever, and then ignore them, right? So if that’s your strategy, again, you’re better off being authorized by somebody else, or being employed, or actually going to do something else entirely.

Ben Marshan:  

Nadia, so those are all great points Sean’s made, obviously. What are the right type of existing businesses that might start to think about going down that self-licensed path?

Nadia Docker: 

So I think it’s the businesses that… The question we look at is, what are you doing when no one’s watching? I think that’s a really important thing to ask yourself if you’re looking to cut corners. You hate compliance. This is really not the space for you. And it’s probably one of the first red flags in a conversation with somebody that we talk about going down this pathway. If you’re looking to outrun ASIC, it’s just going to become harder coming under self-licensed as well because there’s an element of being in control of your own destiny, but you also have to put yourself in a spotlight. You have to do self-report. You have to put yourself in uncomfortable positions.

So I think though the key personality traits, we’re looking for people that are very self-driven, that they like their independence to a point but also understand that community is also very important in this game as well. Because there’s a danger in going out on your own and becoming an island and putting the blinkers on, focusing just on your own business and then not really paying attention to what’s going on in the greater industry. And they look at the future. They see it as an exciting opportunity, and they see that they’re happy to embrace the changes. And I think this is probably a tough industry to be in anyway if you don’t like change.

I think if your personality is more like you prefer the safety, that you would panic if you had a client complaint and had to deal with that, or you got a notification from ASIC just simply because they were doing one of their investigations into insurance or SMSF or whatever it was, if that sends chills down your spine, then this is probably not the space. And you’re better off in that dealer group arrangement because you’ve got the safety of that backup, the support, the hand holding, so that you can focus just on what’s important to you. And I think it’s probably that value proposition thing as well. You need to look at your licensee. If that’s where you’re coming from, the larger ones, what are the services that you’re currently getting that are important to you versus things that you feel you want to have improved by potentially taking control of that yourself? So I think a pros and cons list can never go astray when you’re thinking about doing this.

Sean Graham:  

I’d just offer one additional observation is the business fundamentals are important as well. If your practice is barely making money or is going backwards, if you haven’t invested in systems, if you don’t have capital, then self- licensing is not for you. It’s not a license to print money. In fact, self-licensing often costs, not as much as you fear, but certainly more than you anticipate. And the ongoing costs very seldom creates your own need, as we saw in…

Ben Marshan:  

Can we touch on that, Sean? And, Nadia, jump in if you’ve got a perspective. What are the costs that you’re looking at to run your business, the self-licensed business, rather than as a car under a licensee or paying that licensee fee? We hear a lot of conversations about licensee fees, and they’re in the spectrum of $30,000 to $60,000 or $70,000 a year, other figures were hearing from members these days averaging around $50,000. But is that the similar cost you’re looking at for running your self-licensed business? Or it structured differently, but does it come out roughly the same?

Sean Graham:  

I think if you’ve got a well run business, it can be cheaper than an authorization. Some of those authorizations, even $30,000 is at the lower end now. So you’ve got some groups talking about $70,000 to $80,000. And when you look at, to Nadia’s point, it’s about those services, so how you’re providing those. But what are you going to have to pay for? Well, you have PR. So your PR is going to hit, and you’re going to pay that. So traditionally, your licensing might have provided that or subsidized it. So last time I looked at it, it’s around 2.2% of your revenue. So you’re going to scribble right around $12,000, $16,000 minimum for your PR. And you got your ASIC lending, and that went up a little bit this year, 160%.

You got the membership. It’s chicken feed from that perspective. You’ve got all your statutory lodgement costs for your FSL and whatever else. And then you’ve got the things that are really discretionary, which are absolutely fundamental, which are your external support services. And they vary from next to nothing to if you engage the big law firms, and then we pay a lot of money in a couple of internal organs at the same time. But again, we see a lot of businesses, and many do quite well when they’re spending’s about $30,000 to $40,000 per year.

Now remember, if you become authorized for rent, each authorized rent increases the cost. When it’s self-licensed, it’s not as severe a cost. So when you’ve got 45 people in an AFSL, it’s actually quite cost effective. The biggest issue is, can you get the discounts, because they’re going to be things that would have cost you either nothing or next to nothing in the licensing, so the plan or midwinter or whatever else you research, all those things that you got for nothing or bundled in, you’re going to have to pay for those. And you can negotiate good deals through various providers, but they are cost. But we can say, “Look, the minimum you’re going to get away with if you’re running your own license is probably around $30,000, $35,000 a year. But realistically, most organizations of that size need more support than they’re actually getting.

Nadia Docker: 

Sean, can I just ask a question? When you quote that price, are you excluding a CRM software in that price-

Sean Graham:  

That’s not included.

Nadia Docker: 

… Sorry, I’ve got to get-

Sean Graham:  

I don’t add technology because that’s a discretionary cost. Because we all know you need a CRM, but theoretically, you could run it without it-

Nadia Docker: 

… Sure.

Sean Graham:  

Those are practices that just have boxes of files and whatever else. And it’s inefficient, but you can do it. So I’m just concentrating on the ancillary, mandatory things that we have to lose. We have to get our FS70. We have to have an external auditor. We have to get PR. They are things we can… And we have to be an AFTA member. So I know what all those costs are. The other things are discretionary. So you’re right. When you start to apply those things you go, what CRM am I going to get? And then the CRM is tied into the planning software. And then the planning software is often tied into the research. And so it’s almost you can go so far down the rabbit hole when you try to explore all those costs. And this is where I think that point you made earlier is so important for prospective licensees. It’s about doing that cost and benefit analysis. Look at what you’re getting.

Because a lot of advisors underestimate the value of the services they get, in the same way that licensees tend to overestimate the value of the services they’re providing, right? But there’s a happy medium between the two. And you’ve got to do that analysis first. Because otherwise you get your license, and then you look at all the costs. And then you have that moment of panic, and it’s too late. So you’ve got to have that. And we’re always in favor of spending a lot of time before the application, really sitting down with people and say, “Is this the right path for you?” Because it’s Alice in Wonderland, if you don’t know where you’re going, any path’s good, right? It’s about taking a step back and going where do I want to be? Where do I want to be in 5 years, 10 years, 20 years to have the discipline, resources, and capability to get there. And if I don’t, maybe I should work for somebody else, partner somebody else, or do something else.

Nadia Docker: 

I think further to your point there too, Sean, that one of the things that often overlooked is the time or administrative function of running your own AFSL. Or at least getting it set up and off the ground. It’s the things that people don’t really think about. Are they going to have to be dealing directly with the product issuers, transferring advisor codes, potentially setting up new advisor codes and direct contracts between the AFSL and as the preferred product issuers that you’re working with, which can be a significant drain on the business? And it’s probably not uncommon for us to set up a license and not hear from anyone for three months, because they’re so busy with all of that stuff.

So managing expectations I think with a team are… particularly if you’re coming out of a licensee that supported a CRM software that’s been mandated, that you’re moving off into a new system. Again, obviously there’s a cost consideration of relicensing all of that, but also the time and effort that’s going to be required to set up in a new system can be significant. And I think that it really does need to be a bit of a warts and all. Think about all of the moving pieces that are going to happen here and not turn a blind eye to it. Because I think if you go in prepared, then you’re not going to be too shocked and appreciate that it can be at least six months before you feel you’re finding your feet again.

Sean Graham:  

We’ll never be fully prepared. That’s the other part. No matter how much you’ve prepared here, they’re going to-

Nadia Docker: 

So the expectation loan…

Sean Graham:  

… I know you mentioned about if you move to another system, but what we’re seeing at the moment is even if you’re on the same system, you can still be on with the same provider and still have enormous difficulties getting access to client records and getting that transition. And these are some of the things I’ve noticed. If you go from here to here, we know there’s going to be a setup cost. But if I was using that system when I worked over there, and I’m using that system now, why can’t I access my client records? Why can’t I generate SOAs? There’s a whole infrastructure.

When you really drill down to that licensing, there’s almost a role for a compliance counselor, because I think all these people who are getting their licenses don’t appreciate the amenities. And so you need someone to go around and have meetings with them in a way that our friends do and just reassure it’s going to be okay. We’ll get through it. Because you once you get your license, you’re just working so hard under this pressure that ASIC might turn up tomorrow. Anything, even when you reassure them, ASIC are likely to turn up in your office tomorrow, work on it every time. There’s still this underlying fear that when the big institutions get surveilled by ASIC or get visited, advisors don’t take much notice of it, right?

But there’s this deep and abiding fear that they’re going to be the test case, that ASIC’s going to walk up and say, “Okay, I saw your license application. You’ve got all these things in place. Can you show me?” And theoretically, it can happen. It used to happen in the old days. But this is what’s driving, I guess, that three-month panic to try to get… Starting tomorrow, we need everything in place. And it’s about taking a considered and a reflective approach to it and being appropriate and reasonable, but trying to help them let go of that panic and that that driving fear to a degree because it’s unhelpful.

Ben Marshan:  

Okay. So there’s a couple of themes that are really coming out from this conversation. And so, in the context of the best self-licensed businesses you work with, Nadia and Sean, there’s two things that I want to explore a bit more. There are services that licensees provide to financial planners who are operating through cars and employed models, that you’re going to have to go out and source yourself. And we’ve touched on some of them, compliance and technology and things like that. What are the services that really good financial planning practices that are out there looking for? And where do they actually find them? Because I know that you can go out and you can cherry pick bits and pieces. Or there are licensees now who are offering, effectively I guess, licensee- for-hire-type arrangements where you can go in and buy a package of services for them.

There are others that have separated all the services out, and you can go and buy the bits and pieces that you want. So where should you be looking for these? Where are you finding really good ones? What are the ones that really good self-licensed practices are looking for?

The second thing that I want to come back to after we finish that is, I want to talk about community and where we start to find communities of self-licensed practices. But let’s start with the services and where you can start to find those services. Nadia, have you got any thoughts on that?

Nadia Docker: 

Yes, I do. I think that predominantly, without fail, the service that stands above everything else that self-licensed advisors are looking for is compliance support. It just comes up time and time again in group discussions with the various self-licensing support groups that I’ve worked with as well that it’s the one thing that probably they lose the most amount of sleep over and feel like they don’t really have a strong handle on.

And there’s two ways to go about getting support in that area. And I guess the first one is joining a licensee services group, and there’s a number of them out there. There’s Life Alliances. There’s Centrepoint Licensee Solutions, BT offering, I’ve forgotten the name of it. And then I know there’s a few other players in that space as well that have almost leveraged off the dealer groups that they own to be able to provide the discounting, the templating, and other support services at a cost, obviously, to self-licensed practices.

Then there’s the second one, which is those that choose to because they’re very strong in wanting to remain independent, which we totally understand in the current environment. And they prefer to go out and cherry pick the services that they work with and deal directly with businesses like my own and Sean’s, and use the expertise of them. So there’s various ways that you can do it, like you mentioned before, which might be you just to pick up the auditing. It might be that you want to pick up an AFSL review annually. Predominately, what our clients do is they come on an ongoing package, and we run their compliance committees. We give them the update of policies, keep all of that, the regulatory updates, auditing, et cetera.

So there’s always the full service option as well, which again, doesn’t appeal to everyone. But there’s always a solution out there for what you’re looking for. And there’s plenty of professionals in the market that specialize in these areas as well. And then I guess to a lesser extent but still super, super important, and I think that’s getting… Whether it’s somebody sitting on a board of advice for you but helping drive the business decisions and the business growth and professionalism of the representatives is also I think something we see in those top practices as well, where they’re working with external independent experts in that area as well. Sean, did you want to add anything?

Sean Graham:  

I agree with Nadia to a very great degree. It’s hard to answer that question without almost indulging in shameless self-promotion, but I think she’s absolutely right in terms of where the biggest sources of care, concern, and apprehension all come around legal governance and compliance. Because traditionally, it’s always been a black box that licensees don’t really know. You receive compliance direction from your licensee, and you just respond accordingly. They know it’s important. They don’t really know what it is, what it looks like, or what it costs. And that’s one of the real challenges for businesses, because there are a lot of providers.

So it’s really hard. I think the challenge for any self-licensed business is, once you identify the services you need, whether it’s compliance, research, practice management. You see your only technology solution. You’re power planning, and then you go down ITH and up.

Well, who do you go to? Because you can go to the groups that are former institutional licensees or associated institutional licensees. But how do you balance being an independent business with that type of legacy, because there is a strong legacy that come through about this is the way we used to do it and whatever else. And there’s and overwhelming, sometimes very hard for contributors to compare financial planners. It’s very hard for financial planners to understand whether the compliance person they’re talking to actually knows what they’re talking about or has just boned up enough, did six months remediation in one of the big insiders and now are ready to go. That’s incredibly dangerous, because even their financial planning has credence, but so is compliance.

We tell them. We try to help them build for the future. We do reviews. We did licensee reviews. We help them refine their documents and processes and maintain all that type of stuff. But then you’re never going to know how that works in business. And this is the real challenge for licensees about, and this came back to the point I made earlier about risk, their tolerance for risk and their capacity to actually compare. And what I would say to any of these groups is, review your decisions. You’re going to have an outsourcing policy. You’re going to review what you outsource. Take that seriously. Don’t engage someone because you knew them when you used to be advisors together, and they’re a good guy.

Actually go to market, test them, and compare apples with apples, which is the biggest issue. We’re seeing some, they come to you and they go, “Well, this is what they’re charging.” And you go, “Yeah, but they’re not doing anything,” whatever. There’s a great mismatch between cost and value. And ironically, even their financial plans have been talking to contributors for a long period about don’t confuse cost with value. They often make that same mistake when they go into self-licensing. They go with the cheaper option rather than the better option.

Ben Marshan:  

Thank you for those points. So what I’m hearing though is that there are a lot of different service providers you can go to. There are a lot of different pros and cons to each of those service providers. But as somebody who’s coming fresh into the self-licensing world making those decisions, we touched on it before, but community becomes really important. So what are the good communities that you’re seeing out there and the good places that that members can go to, to try and find these support groups around self-licensing and finding the right service providers?

Sean Graham:  

Look, there are number of different places you can look to because even with their inherent limitations or biases, those groups, whether it’s BT Open, MLC Connect or whatever, at least have networks in place. The greatest challenge for most advisors, particularly self-licensed businesses, is getting an objective understanding of where they sit. And community is far more important than they realize. And what we’re seeing realistically across the board is that, that is the real need for a lot of clients at the scene at the moment is that they get all the larger stuff in place and whatever else. But they’re looking for, “How do I connect with businesses mine? How do I meet people that I can test ideas with, that I can do those types of things?”

So your associations a good way to deal with those, whether it’s BT Open, MLC Connect, or the other groups that are doing the same types of things. But you can also self-correct your own sheets, and then you’ll meet people. You’ll know other advisors in similar businesses. The good practice is, know the other good practices. Keep an eye on them, even though they’ll never acknowledge that they know who their peers are, and they know who aren’t their peers. And so be self-licensed in a way that they couldn’t when they were institutional licenses. If you’re were big practice of CFS, and you want to catch up the big practices at NAB, you will get no support from your BDM service manager or anything else, unless it was an opportunity to recruit them into the group.

Now, once you’re self-licensed, you can engage with your peers in a way that makes them peers. And those peers are also not only a way to give you information, share information, share tools and resources, and to support each other over time, help you build businesses, but it’s a trusted resource. Because to that point about who do you engage, if someone says they’re a compliance expert, are they compliance expert? You go to the people who have played in that space. You look to the practices that have been around for a while that are growing, that are consistently growing, and talk to them about what they do and how they approach it. And that’s the real value of community in a sense.

Nadia Docker: 

I think the only other thing I’d add, there are some… The industry associations was an obvious one, the larger, more well known ones like the FPA. There are some independent groups out there like the boutique financial planners group as well that specialize in a community-based independence group there that are for the self-licensed advisors out there. I think more traditionally, there’s the licensee support groups is where a lot of clients gravitate to because of structure, particularly around training and things that they can get on a regular basis. I always think it’s a good start to speak to another advisor that runs their own licensee that you respect and talk to them. Talk to them about the challenges they’ve faced. What’s worked for them? They will always have good recommendations. They’ll give you the good experiences, the bad experiences.

But it’s understanding what your expectation from the service delivery is going to be as well. A lot of times we have seen or come across, unfortunately, when it’s too late and it’s gotten to the stage where the AFSL is now dealing with ASIC. And they’re putting forward to ASIC, “Oh, but such and such was providing me with these compliance services.” And what they haven’t fully understood is that it hasn’t been a comprehensive service, and that it is not going to help them. And that just because they’ve got all these things that are off the shelf like an off the shelf compliance manual, things start quickly unraveling because those processes usually start with, “Well, let’s have a look at what you’re doing. You tell us what you’re doing.” And then they call in all the documentation.

And all of a sudden, you end up in this space where there’s a complete disconnect with what the business thinks it’s doing and what’s actually down on paper. So you need to really have a comprehensive support solution in place that deals with AFSL compliance, that deals with advice compliance, and that can also identify those opportunities in the middle around policy and process improvement that can supply training to staff and advisors where they may know loosely what their requirements are, but they don’t understand really why they’re doing it. And I think that’s probably the biggest opportunity to train on is to get advisors and their staff to understand why they’re doing something so that they’re able to react to situations better, rather than thinking I just do this because somebody told me years ago this is what I should be doing.

Ben Marshan:  

… Thanks, Nadia. So as Nadia and Sean both generously pointed out, professional associations have great communities of members. And we obviously have a lot of self-licensed members in the FPA. I just wanted to highlight that we have the FPA professional practice program where there is a lot of good self-licensed businesses in those. If you haven’t checked out FPA community, there are some great conversations going on there. There will be a thread related to this podcast where you can start to ask some questions and get some feedback. And we actually have a self-license community within communities, which is something else you can have a look at.

The FPA CPD catalog has a lot of webinars and articles and information about running self-licensed practices and some of the support tools you can get there. And then of course, we’ve got the ready index, which is a great tool for helping you assess your business and where your business is and where you need to make improvements and grow there. So I think I’d to thank Sean and Nadia for joining us today. But what I wanted to do was just give you an opportunity to do your elevator pitches and speak to our members about what services you’re providing, particularly to the self-licensed community. So, Nadia, what’s your business?  How does it work, and what are you doing?

Nadia Docker: 

Yes, so my business is Kinetic Compliance. We are a full-service compliance operator. So we do everything from license applications, variations, working with practices in particular as they’re making that transition into self-licensing. And doing that hand holding is probably one of our flagship offerings, because that’s what we see is the most important. We don’t want people getting their licenses and then just being sent on their own way. So we like to come in and set up the framework, the compliance framework, help you customize the policies, get all your key documentation in place, put some structure around your key committees, compliance, investments, et cetera, and then help you with the auditing aspect as well. So we also do our due diligence to help with book buyers. So it’s a very broad offering. But our sweet spot is very much ongoing support to AFSL, that’s full level.

Ben Marshan:  

Thanks, Nadia. And, Sean?

Sean Graham:  

Assured Support is a team, I think we’re up to about 14 people now, that was really built to provide compliance governance, risk advice to advisors, and to really help them move into the future. And we’ve always thought that one of the biggest challenges for advisors and self-licensed groups is getting that innovative, unconflicted, and effective compliance. So that’s what drives us to build this business. We’re a bit different. We take a risk-based and contextual approach to compliance, and we’re also data driven. So again, when you look at… What are we up to? About 13,000 client files were reviewed. When you look at the data, we can actually take a really industry-wide approach to things so we can understand what’s going on.

And that helps our clients be able to understand that they’re doing well. They’re doing well relative to the industry and how they’re doing in qualitative terms. And so that’s how we’re set up. The only thing we don’t do is paraplanning. Apart from that, when we look at everything from reg-tech to training to ongoing advice to reviews to governance to compliance committees, we do that as well. We also publish a lot. So there’s a lot of tools on the Assured Support website that advisors engage in to help them make the decisions and to understand what that’s obligations are. And because we’re a big team, we stay on top of things. Because if you’re only complying with the law as it is now, you’re already doomed. The great opportunity of working in financial services is you’ll never get bored. And there’s always lots and lots of things to do.

Ben Marshan:  

As I like to say, we have four laws, we have eight regulators, and we have a hell of a lot of chaos in between all of those things, which is why I love my job. Thank you, Sean. Thank you, Nadia, for joining us today on the FPA Podcast. Thank you for your amazing insights. As I said, we’ve got a discussion going on FPA community in relation to this podcast. So please jump on there and join the conversation there. Ask your questions. Look for support. Join the community. But thank you, Sean and Nadia, for joining us today. And thank you everyone for listening in to the FPA podcast.

Sean Graham:  

Thanks, Ben. Thanks, Nadia.

Nadia Docker: 

Thank you, Ben.

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