The AFSL Market in Australia

In this expansive overview of the AFSL market we will review the current landscape of AFSL services available to Advisers and Practices. What are the core services, possible additions, and advanced business service offerings emerging?

Plus, for those reviewing an existing AFSL, or seeking a new AFSL, we have included some recommendations from our AFSL Review Checklist*.

To begin, we have broadly categorised AFSL’s into segments, Large (50+ Advisers), Mid-Tier (10-50 Advisers) and what is now referred to as Micro (less than 5 Advisers), and in doing so, it creates an interesting picture.

Micro AFSL’s

According to Industry analytics company Wealth Data there has been some 450 new market entrants in the micro AFSL segment since 2020. This suggests that single Financial Advice Practices are self-licensing, or possibly 2-3 Practices are forming an alliance.

This is a peculiarly high number of new AFSL’s into the segment. Potentially driven by the large number of Consultants emerging since the Royal Commission in 2017  promoting Compliance and Audit, Outsourced RM, and / or full white label AFSL services to assist with self-licensing.

The self-licensed path requires capacity to fully benefit from the potential savings, perhaps value sits in larger 10 plus Adviser Practices or Accounting firms. We’ll delve into the detail of the benefits and pitfalls of self-licensing in an upcoming article.

Mid-Tier AFSL’s

Boutique or Mid-Tier AFSL’s offering core services are scattered across the market, some tailored with an Insurance focus or an SMSF focus, in the main they service wholistic advice practices.

This segment also includes the Accounting sector, plus self-licensed standalone Financial Advice firms with 10+ Advisers.

This is where the sub-segments really kick-in relative to AFSL ownership structures. These consist of:

• Privately owned
• Adviser/s owned
• ASX Listed companies
• Unlisted public companies

AFSL services provided to Advice Practices can be summarised to include:

Basic or Core Services

• AFSL ownership and related obligations & risks
• APL Management
• Revenue Payment Systems
• Risk management: Supervision & monitoring which typically includes, which typically includes Compliance support and Annual Audit – (SOA Reviews)
• Professional Indemnity Insurance
• Access to discounted education courses (typically Kaplan) and PD days

Possible inclusions:

• Software and/or discount Xplan.
• Para-Planning
• Online Advice portal with templates and useful info
• Marketing support and Collateral – Monthly Newsletter for clients
• IT&T support with website / apps / basic system maintenance
• Cyber Security support
• Adviser Community
• Events and Annual Conference

Large AFSL’s

Once purely the domain of the large institutionally run Dealer Groups, this category has expanded to include unlisted public companies, privately owned companies and stockbrokers (Non-AFSL’s providers).

ASX listed company’s (institutions) make up the top three with AMP, Insignia, and Count. Morgans and Ord Minnett represent the Stockbrokers coming in at 6 and 10 respectively.

With scale comes capacity to offer additional services and support to Practices, and this is where it becomes interesting. Many Large AFSL’s have evolved well-past the old Dealer Group Model and have emerged as Business Services providers, with AFSL services.

Relative to the emergence of these new Business Service providers, you may wish to view our associated article: R.I.P. Dealer Groups.

Atop of the core services listed above, the majority of the possible inclusions will also be provided. Either in a base ‘core’ service offering with add-ons, or a bundled service to include all the services.

The larger AFSL’s also have the IP and capabilities to offer additional services again to include such things as:

• Access to Investment Specialist support & Research
• Portfolio support (such as managed accounts of MDAs)
• Structured Business Consulting programs
• Business & data analytic tools / segmentation / cost of service
• M&A and Capital Support / acquire/ merge / grow / succession
• AFSL facilitated client ‘book’ acquisition
• Digital Marketing ‘white label’
• HR Support
• Professional Year Programs
• Xplan Discounts and customisation such as in / Threads / Templates / Support
• Dedicated Transition Team and ROA/SOA support

FEES:

Without a detailed examination, there a three main models:

• Percentage based fee; circa 10% of Practice Revenue – you’d expect a large AFSL service offering as outlined above.

• Fixed fee; range $20-50k. Small through mid-tier and large AFSL’s. You get what you pay for.

• Combination - Fixed fee plus a percentage; as above, core services plus un-bundled additional services, pay per user.

AFSL Agreements vary greatly with services and fees and most will have additional associated costs such as technology fees, PI insurance premiums, ASIC levy and so on.

Licensees may charge a minimum annual fee, and larger firms can benefit from a fee cap.

Discounts may be applied during a transitional period (ROA/SOA support also)