Originally published |30 October 2018

There are lots of questions being raised at the moment about the benefits of being licensed through an Australian Financial Services License or being self-licensed.

And when considering this I think that the easiest way I can explain the differences is as follows.

What is the difference between renting or owning a home?

It comes down to two things;

1. Responsibility; and

2. Control.

When you own your own home, you control all decisions regarding the home and also have all the responsibilities of ownership. When you rent, you don’t control the home and you can’t make decisions without approval.

The same is true with being an adviser.

If you are self-licensed, you have full control and all the responsibilities of running a licence. When you are an authorised representative, your responsibilities are to the Licensee and you have very little control.

There is a misnomer when you are an authorised representative that you can still run your own game. But this isn’t true.

Whilst you will be given some freedoms, it is also important to note that the AFSL is ultimately responsible for your conduct.

In my experience there is still an under current with some advisers who believe that they don’t have to adhere to policies and processes set out by their licensees. They believe that they can do their own thing and when it goes bad, leave it to the Licensee to mop up the mess.

These advisers believe they can rent the house but also knock down walls without permission.

So what will happen if there is independent licensing?

There will need to be a change in the mindset of some advisers.

Individual licensing will mean that advisers need to face up to their responsibilities as they won’t be able to abrogate to the Licensee if issues occur. It will leave them open to greater scrutiny.