How to select a licence holder

Options to work for a licence holder

Some licence holders, particularly institutions, will require representatives to work from their premises where the relationship is more like that of an employee rather than a business partner. Other licence holders operate more as a franchise and are far more flexible for authorised representatives who are considering working out of an accounting practice.

Your goals

It is important to consider your goals when choosing a licence holder

Many licence holders provide attractive incentives to encourage financial planners to their network. However, it is important to consider your future goals when starting out, rather than when you want to change licence holders or obtain a licence of your own. Many authorised representatives have found that the needs of their clients and their practice are best met with their own licence.

Licence holders legally 'own' client data and upon leaving, you may find it difficult to take your clients with you. Therefore, authorised representatives should ensure that their contracts allow clients to move when they do and that outsourced services (such as training and compliance) are available if you decide to obtain your own licence in the future.

What further training will I need to complete after finishing the initial RG 146 requirements?

In addition to the initial training requirements you must meet to become an authorised representative, there are also ongoing training requirements you are expected to undertake to maintain and update your knowledge. The ongoing training requirement results from the constantly changing legislative environment, changes to technology and the need to ensure authorised representatives 'know their product and their client'.

Many licence holders arrange training sessions and conferences in-house to ensure ongoing training requirements are met. You should check what training will be provided and what additional training you may need to undertake.

Your prospective dealer may also require you to complete in-house training in order to ensure that you are familiar with their internal requirements and processes.

Will I still be able to provide independent advice?

Advice must always be relevant and specifically tailored for the client, as required by law. You should also provide independent advice to your clients. However, there are extremely strict requirements on how the term independent can be used by financial planners. So even if you offer unbiased advice, the ownership and remuneration structure of your licence holder may prevent you from publicly using the term.

Is there a fee for working under another person's licence?

There are three ways a licence holder will normally charge you for becoming an authorised representative: a split on commissions, a flat fee paid to the dealer, or a combination of the two. While the percentages or fees may vary considerably from one dealer to the next, generally speaking, what you will get will be directly related to the amount you are charged. There is also a limit to the amount of service a licence holder can provide once a representative's business has grown to a reasonable level, licence holders should not be taking any additional cut or fee.

Will they impose compliance and audit requirements?

As the licence holder is ultimately responsible for the advice being provided, there is an obligation to impose compliance and audit requirements on their authorised representatives. A licence holder would therefore regularly audit their authorised representatives annually or even quarterly.

On the surface, it may be appealing to select a licence holder who is less stringent with their compliance. However, ASIC has the power to revoke a licence if it concludes that the licence holder's compliance process is inadequate which would be far more detrimental in the long term.