FEBURARY 18, 2020
By Scott Brewster
Industry changes following the Royal Commission report are prompting a growing number of financial planning advisers to move licensees.
But before you can move, you need to completely digitise your documentation. This will be a requirement for both leaving your old licensee, and for helping your new licensee to do their due diligence on your business.
You need to quickly and easily get your data management systems up to date. Here’s how you can make that happen...
Following the Royal Commission’s shakeup, the financial planning industry is in a state of flux. Licensees can no longer subsidise the costs of running a business with product fees the way they traditionally did. As a result, many are changing their pricing model to compensate.
The subsequent rising costs and a wish for more control are prompting many advisers to move financial planning licensees. But transitioning to a new licensee may not be the straightforward task it sounds like.
Let’s take a closer look at the reasons for switching licensees, and what Umlaut can do to help.
As a financial professional, you don’t have to be part of a licensee group. To be able to give financial advice, you just need to hold an Australian Financial Services (AFS) licence, or be employed or authorised by a business that holds a licence.
However, as a general rule, the Australian Securities and Investments Commission (ASIC) issues licences to dealer groups, rather than to individuals. Around 25,000 financial planners currently operate in Australia, 42% of those under a licence issued by a financial institution.
One of the main benefits of being part of a dealer group, otherwise referred to as ‘being under a licensee’, is that it makes it easier and cheaper to get a licence.
A licensee also generally covers insurance costs, which can be a significant saving. And especially since the Royal Commission report, professional indemnity insurance rates have gone up 30-50%, so many independent advisers struggle to get coverage.
Additionally, licensees generally cover education, support and training for their advisers. Plus, you get peace of mind that you’re compliant and meeting your legal responsibilities.
So there are definite advantages to being part of a licensee group.
Yet in Q3 2019, 5% of advisors moved to a new licensee. Of those:
The reasons will vary between advisers, but here are some typical reasons for moving licensees:
However, moving to a new licensee isn’t always a simple process.
Before you can move to another licensee, you need to have all your records up to date. You also need to be able to present detailed business performance information beyond your basic P&L and balance sheet.
Most licensees require you to have everything digitised, audited and checked before you leave and receive your final payment.
And your new licensee will also require you to have everything digitised so they can carry out due diligence on your business. They’ll want to see the size and quality of your book, and will be looking for proof of strong past revenue and good practices. They’ll also want to see your plan for taking your business into the future.
But if you’re like most advisers, you probably have all that information in paper files stored in boxes in your spare office or storage. Or, if your records are digital, they may be scattered across Dropbox, Google Drive, or various hard drives.
Setting up good data management now makes leaving your current licensee simpler, and helps you put your best foot forward with a new licensee.
Umlaut are the experts at wrangling financial advisers’ data into shape. While we have a range of solutions that can help, Migrate and AdvisorForms will have the most impact if you’re looking to move to a new licensee.
These solutions will help you to comply with your existing licensee’s requirements, and make your practice more valuable to your new licensee. It will also help you to comply with FASEA Standard #8, which requires you to keep complete and accurate client records.
If you’re one of the many advisors looking to move financial planning licensees, getting your record-keeping system current and accurate is vital. Umlaut will help create order from your chaos.
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