Applying for an AFSL? Here’s what you need to know

Date: 08 January 2019

The trend towards self-licensing is accelerating.

Financial advisers are increasingly opting to work under their own AFSLs due to the greater sense of control it can offer. In fact, the number of AFSLs granted by ASIC grew by 32 per cent between 2015 and 2017.

But simply deciding to go forward with self-licensing is just the first step in a long and complicated process, making preparation key to ensuring a successful AFSL application.

In its new guide for financial advisers, titled ‘Your own AFS licence – what you need to know’, Netwealth explains how to apply for your own licence and what you can expect along the way.

Before you apply

Even before you get to the application stage, it is important that you first review your vision for your business, your professional future and your personal lifestyle.

You need to clearly anticipate how you propose to operate an effective, profitable practice as a licensee, while delivering outstanding value to your clients. You should also consult with your spouse and other family members, as your business transition might affect them.

Obtaining an AFSL can be exciting, but the process also carries risks, which you and the people closest to you need to be comfortable with. It’s then worth considering the following questions:

  • When do you plan to make the transition? (It’s good to have a specific date to aim towards)
  • Who will be with you in the licensee business? (Will obtaining an AFSL require any change to your business’ How to apply for your AFSL staffing? Do you have the internal and external expertise available to transition effectively? Can you recruit people with the right expertise to serve on an advisory board for your business?)
  • What level of professional indemnity insurance will you require?
  • Will you have the right technology in place to support the licensee business?
  • Will you have adequate access to high-quality investment research (enabling you to provide the most appropriate product and strategy recommendations to your clients)?
  • Will you have a rigorous governance framework in place?

You will also need to negotiate your departure from your current dealer group.

This will involve ensuring that you are not in breach of contract terms and conditions, and reaching an agreement on ownership of client accounts and referrer arrangements.

Be as open and transparent as you can with the dealer group management and document your severance agreement in as much detail as possible.

At the end of the day, it will be your clients’ decision as to whether they follow you to your new business entity or prefer to stay with your (now) former dealer group. It’s therefore essential that you keep your communication with clients as open, honest and positive as possible.


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The application process

You can apply for your AFSL online, using ASIC’s ‘eLicensing’ system, which tailors the application to your business.

As explained on its website, ASIC will assess your application by considering whether you are competent to carry on the kind of business you specify, have sufficient resources to operate the business, and can meet all other licence obligations, such as training, compliance, insurance and dispute resolution. You will need to demonstrate these with documented proof.

From beginning to end, the process of applying for your AFSL will generally take at least a month, but probably much longer, depending mostly on how prepared you are before you apply. You will need to provide a detailed description of your business, including a comprehensive account of your experience, skills and resources, along with business references, financial records and evidence that you can obtain adequate professional indemnity insurance cover.

Ryan Goodfellow, national growth manager at Centrepoint Alliance (a leading network of financial advisers and boutique licensees), suggests the processing time for an AFSL depends on a number of variables relating to the quality of the application.

“We have a team that facilitates the application process. To position things, prepare all the proofs and get it all together, we invest a lot of time at the beginning,” Goodfellow says.

“We submit the applications which go into the ASIC work flow and have had one that came out after three and a half weeks. ASIC issued a guidance paper in November last year saying they endeavour to get 70% of applications done within five months and 90% within eight months.”


More on self-licensing

The application process for an AFSL can be challenging in terms of the amount of time it takes and the level of bureaucracy you may encounter. But if you’re prepared and put in the time and effort required, you are likely to succeed.

If you’d like to learn more about how to become self-licensed, Netwealth’s adviser guide breaks down the benefits and challenges that come with becoming a licensee. The guide also offers several tips for how to best manage a new licence in terms of compliance and ongoing costs.