How to Select a Licence Holder Key Considerations







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How to Select a Licence Holder Key Considerations

This guide will provide further information and assistance in completing the profiling tool. You should also use this part of the guide to make some notes on your profile about questions or issues that are important to you and need to be addressed before selecting a licence holder.


Structure of the licence holder




In the financial advice market place there are different types of licensees. 1.1.1 Institutionally owned

This form of licensee is controlled by either a large fund manager, insurance body or banking organisation. The approved product list for this type of licensee may be restricted to those financial products also controlled by that organisation. (e.g. a fund manager based dealership will issue financial products under its name in a variety of asset classes). There are a mixture of institutionally owned models, including employee models and franchisee models, where you can continue to work out of your own premises.

Examples of institutions are the banks and licensees such as AMP and AXA.

1.1.2 Not institutionally owned – franchise model

A franchisee operation is a very common form of operation for the larger licensee groups. Franchise operations often span capital cities, regional and remote locations. Authorised representatives trade under their own name. However, disclosure of the licensee's name is required by law and must be displayed more prominently than your business name in all materials. This is to ensure that clients are clear about whom they are dealing with (i.e. the licensee). The product list for a franchisee operation may be restricted, not because of

ownership issues but compliance reasons – as the more physically diverse the group, the harder it is to control the advice being provided.

Some examples of franchise type operations are Count and Professional Investment Services (PIS).

1.1.3 Not institutionally owned – boutique

This type of licensee structure differs from the other options on the basis of size (often less than 25 representative/authorised representatives). They tend to exhibit the following characteristics:

· target high net worth investors >$500,000; and/or

· focus on independence; and/or

· more tailored approved product lists; and/or

· fee structure or value proposition on the basis of a set price for a specific function or the amount of Funds under advice (FUA).

To be authorised by a boutique licence holder, you will normally need to become a part of the practice, as either an employee or partner.



Authorised representative -v- representative

The ownership and structure of the licence holder will, to some extent, dictate if you work as an employee (of a licensee in your practice) or in practice giving advice to clients yourself as an authorised representative.


(Employee of a licensee)

VS Authorised Representative (Agent or contractor)

· Employee generally bears no risk · Employer is legally liable for the work

· Employee works as part of the employer’s business

· Employee performs work themselves and cannot subcontract

· Typically a contractor, has more


· Works in accordance with a specified contract

· Contractor works as part of their own business and may associated with other businesses

· If corporate authorised representative, may subcontract or sub-authorise another representative

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1a. · If you already own your own practice, you should be looking for a franchisee model licence holder, and you will need to work as an authorised

representative, not just a representative

· If you’re making a career change and don’t have a client base, you could consider becoming a representative of a boutique firm, or work in an institutional model that will provide you with the support you need to get started.



You will need to consider how your independence will be affected by the type of licensee you choose and your ability to operate in the true sense of 'being independent'. If you currently advertise that you are independent or you have the word independent in your business name and want to retain it, you will need to ensure that the structure of the licensee you choose permits you to continue to call yourself independent. The Financial Services Reform Act (the Act) places restrictions on the ability of a licensee or its representative to use terms such as independent, impartial or unbiased. This restriction is found in section 923A of the Act. What this restriction means is that you can only call yourself independent if both you AND your licence holder:

· do not receive commissions (apart from commissions that are rebated in full to your clients);

· do not receive forms of remuneration calculated on the basis of the volume of business placed by the person with an issuer of a financial product; and

· do not receive other gifts or benefits (i.e. soft dollar/incentives) from an issuer of a financial

product which may reasonably be expected to influence you.

You must also be able to operate free from direct or indirect restrictions that relate to the financial products for which you provide financial services. In carrying on the business or providing these services, you must also operate without any conflicts of interest that might arise out of your or your licensee's association or relationships with financial product issuers (i.e. fund managers etc.). Finally, you must also have no ‘conflict of interest’ that could reasonably be expected to influence you in carrying on the business or providing the services.




Licensees, particularly those at the larger end of the spectrum, will often have affiliations or relationships with institutions, product providers, (fund managers), banks and insurance companies. Affiliations can be beneficial depending upon what you are seeking when providing advice to your clients. However, if you are determined to remain independent, such affiliations may considerably curtail your ability to do so.


Which financial institutions does

the licence holder have an

affiliation with?

What to look for:

Many licensees have affiliations with the major financial institutions (e.g. large

banks, insurance companies and fund managers) which may not be obvious from

the name of the licence holder or even the products that can be recommended.

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1b. · Use of the term 'independent' is highly restricted. Virtually no practices can use the term, even if they are independently owned and operate on a largely fee for service basis. If independence is important to you, you will need to consider whether you want to be able to call yourself independent, or whether it is sufficient to work in an independent way.



The services you want to offer

The types of services you will be able to provide to your clients as an authorised representative is very much dependent on both your skills and experience (i.e. evidence of being RG 146 compliant and any prior experience in the provision of advice in a particular assets class, such as cash, equities,

managed funds, property etc.) and what the licensee is prepared to authorise you to provide advice on (i.e. under agreement and backed by authorisation limits on the copy of licence).

However, even if you do not initially have the skills, knowledge and/or training to be able to offer all the services you would like, you should take a longer term view and consider licence holders that will eventually be able to service all your needs.


Advise or deal

There is a difference between the provision of financial advice and dealing in a financial product. It is important for you to understand the difference as this will help you to decide which type of licensee to join.

To Advise:

Advice is intended to influence a person(s) decision about a particular financial product or class of products. There are two types of financial product advice under the Act. These are personal advice and general advice.

Personal Advice - is financial product advice that is given or directed to a person (including electronic means) in circumstances where:

a) the provider of the advice has considered one or more of the person's objectives, financial situation and needs; or

b) a reasonable person might expect the provider to have considered one or more of those matters.

General Advice - is financial product advice that is not personal advice – s766B(4) (FSR Act) To Deal:

The type of conduct as follows constitutes dealing, whether someone engages in this conduct as a principal or agent:

a) applying for or acquiring a financial product; b) issuing a financial product;

c) in relation to securities or managed investment interests – underwriting the securities or interests;

d) varying a financial product, or e) disposing of a financial product.

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2a. · It is likely that you will want to be able to advise and deal. You need to ensure your licence holder has the capacity to authorise you for both.



Types of advice you want to provide

One of the most important decisions you need to make is about the type of financial products you wish to advise your clients on. A licensee will provide on their approved product list a variety of financial products from the broad asset classes as follows:

· Shares (Domestic) · Derivatives (hedging)

· Shares (International) · Tax effective investments

· Managed investments

(inclusive of property syndicates) ·


· Superannuation · Margin lending

· SMSFs only · Term deposits / cash management, etc.

· Insurance · Investment life policies

Limitations on authorisation

It is common for a licensee to place certain restrictions on the authorised representative. The restrictions usually relate to limitations on the scope of the advice the authorised representative is permitted to give or is limited to advice on particular products on the approved product list.


Will any limitations be placed on

my authorisation? If so, what

would these be?

What to look for:

Any limitation placed on the type of advice that can be provided will be based on

the authorised representative's existing education and experience in the area in

which advice is to be provided (e.g. equities or managed funds, risk insurance,

self management super, etc.), and on the licence conditions placed on the

licensee by ASIC

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2b. · Do you have the necessary education and experience for the area/s in which you seek to provide financial advice to your clients'? If you don't, can you gain that experience and expand your authorisation?


Products you want to offer clients

An approved product list is a list of investment, risk insurance products and classes of financial product that the licensee you choose will have that it has approved for use by its representative and authorised representatives. The list is often a modified version of larger product lists provided by research houses. Licensees have an obligation to research the products before placing them on their approved lists.


What products does the licence

holder have on their approved

product list?

What to look for:


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2b. · Does the licensee you wish to join cover the full range of products?

· Will you need to obtain a cross authorisation? (i.e. obtain an authorised representation from several licensees covering the product range you wish to advise on)

· Will you be expected to consistently place business with any one product provider?

· Is there an emphasis on the part of the licensee on placement of client funds in a particular asset class or through a Wrap or Master Trust?

· Is there an expectation on the part of the licensee that you MUST put client money in products?

· Does the continued support of you as an authorised representative of the licensee depend upon the placement of product?

· Have you considered what products, if any, your existing/potential client base may require?

Advising on non-approved products

Non-approved products are those products or asset classes that the licensee has specifically excluded from its approved product list. The reason for their exclusion is varied. It may be that the licensee does not like the style of management of a particular fund, or the performance may not be up to scratch. It could also be that the products are part of an asset class that the

licensee's licence conditions precludes them from either advising on or dealing with i.e. Tax effective agricultural schemes, property syndicates, horse racing syndicates, etc.


Can I recommend products which

are not on your approved product

list? If so, what is the process?

What to look for:

Generally no, you would not be able to recommend products outside the

licensee's approved product list. However, some licensees permit it after following

a thorough investigative process and sign off by the



If it's not clear why the approved product list excludes certain products that you

may wish to advise on, ask the licensee why?


How is the approved product list

put together?

What to look for:

What is

the process of retention or updating products on the licensee's approved

list (ie. process, currency and frequency)?



Fees -v- commissions

In the financial advice industry, remuneration can be received in many different forms. These include commissions paid to you based on the products you recommend the client invest in, fees for the service you provide, a combination of fees and commission or fees calculated on the basis of the amount of client funds you have placed and have under management.


What method of remuneration is

acceptable for your licence holder?

What to look for:

Licence holders can dictate how you charge your clients. Some require a flat fee

to be charged for advisory services provided. Others insist that you charge

commissions based on the volume of business generated from clients.

A percentage trailer fee may be charged on all managed fund products. Can this

trailer be fully rebated or does the licence holder keep a portion of the fee?

If commissions are received, what is the split between licence holder and adviser,

and how does this change with increased volumes of business written?What

method of remuneration is acceptable for your licence holder?

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2c. · What "percentage" of trailer fee/s does a licensee remit to their representatives on products sold?

· Do you wish to rebate any fees received to my clients?

· How will you disclose the types of remuneration received from product recommendations and continuing business?





Initial requirements

All planners are required by law to complete some training specifically in financial planning before they can become an authorised representative. The requirements are detailed in ASIC's Regulatory Guide 146 (RG 146).

There are generic knowledge, skills and specialist knowledge criteria in which you will need to complete training. For the specialist knowledge areas there are eight areas that you may need training, depending on the type of advice being provided.

· Financial planning · Superannuation · Managed investments · Securities · Derivatives · Insurance

· Bank deposit products

· Foreign exchange

You will either need to complete courses that are listed on the RG 146 register which meet the specialist knowledge requirements or undertake individual assessment to demonstrate you have knowledge and skills in the area.

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3a & 3b. · If you have a lot of experience but have not completed any RG 146 compliant training, you should explore the individual assessment option. It is not

necessarily a cheaper option, but it means you don't have to complete specific courses if you already have enough knowledge.

· Alternatively if you don't have a lot of experience, you need to find out if the licence holder offers RG 146 compliant training as part of their induction, or whether this is something you need to complete first.

CPA Australia offers RG 146 compliant training for members via the RG 146 Compliance Solution


What RG 146 courses are

accepted by the licence holder?

What to look for:

The licence holder has the final decision about the courses it considers are

acceptable. If you have completed RG 146 training with CPA Australia make sure

the licence holder recognises these courses.

While formal qualifications are very well regarded, they are not necessarily a requirement imposed by licence holders. For CPAs who already hold a degree, the decision to pursue additional formal qualifications in financial planning may be more for personal satisfaction than for future employment prospects. That said, a postgraduate level qualification in financial planning such as a Graduate Diploma or Masters provides an excellent foundation for those seriously focusing on a financial planning business.


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3c. · Consider if you are prepared to complete a formal qualification in financial planning, as this may restrict the number of licence holders who will authorise you. Formal qualifications may vary from a Diploma of Financial Services (Financial Planning) through to a Masters of Financial Planning.

Existing practitioners

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3d. · An existing client base is often more attractive to a licence holder. Make sure the licence holder is still willing to accept you if you don't have a client base.

· Be wary of pressure to sell products if you already have a client base.


Ongoing requirements

In addition to the initial training requirements to become an authorised representative, there are ongoing training requirements to maintain your knowledge and skills. This will ensure you are up-to-date with the changing legislative environment and changes to technology. It will also help you to effectively risk profile a client, to 'know your product and client' and provide sound

financial recommendations suitable for a client's circumstances.

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3e. · Have you asked the licensee about the content of ongoing training (i.e. compliance, technology, legislative, etc.)?

· How frequently does the licensee provide training to their authorised

representatives (i.e. monthly, annually, bi-annually or as changes to relevant legislation arise)?

· Is a certain number of hours of training per annum prescribed by the licensee?

· Is the licensee or the authorised representative responsible for maintaining a training register?


How much training will be required

on an annual basis?

What to look for:

If you are not prepared to do at least 20 hours training specifically in financial

planning, you should consider if this is a good long term option for you.

If a licence holder does not expect at least 30 hours training in financial planning,

they may not be meeting their licence obligations. This could be damaging to your

brand in the long term if they are audited by ASIC.


Format of training

A range of delivery modes are used by licence holders, depending on the size of the licence holder and geographic spread of the planners. Training delivery methods include:

· Face to face;

· Distance learning, with materials such as training videos sent to planners' offices to view and complete assessment materials;


· On-site for planners who are located in an office with several authorised representatives from the one licence holder.


Will there be any ongoing training

provided by the licensee for an

Authorised Representative?

What to look for:

Most licence holders provide training in-house for you. You should be wary of

licence holders that rely solely on free training provided by fund managers, or

those that do not provide any in-house training on compliance procedures.

However, if only a minimal amount of training is provided by the licence holder, the

cost for being a part of that group should be less.

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3f. · What is the usual format of the training, i.e. in-house courses/seminars, learning online through a third party such as Kaplan?

· If face to face is the only option available, find out who pays for planners to attend the training.


Annual conference

Many licence holders schedule an annual conference to meet part of their training requirements. These conferences can be extremely valuable to share ideas with fellow colleagues, build networks of support, and fulfil your ongoing training requirements.

Unfortunately some licence holders offer massive incentives to their planners to attend conferences in 'exotic' locations if they have written a large amount of business. You should make sure you are fully aware of how the conferences operate before you become part of the group.


Incentive programs attached to


What to look for:

Conferences that are used more as an incentive to write business rather than as a

way of meeting their ongoing training requirements.

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3g. · If a conference is compulsory, you should explore who pays for you to attend. If you are expected to pay, find out locations of previous conferences as the cost may be considerable.



Services and support offered



Software should be an important consideration in the selection of a licence holder as this will often dictate the detail, quality and complexity of plans that you will be able to produce. Software is either developed in-house or by a specialist software provider.

The complexity of financial planning software varies enormously so it is strongly advisable that you arrange a 'test drive' to determine how simple it is to use. In doing so, you should ensure that the following key components are provided.

· Client management system

· Investment tracking system

· Financial planning modelling software · Plan production software

· Portfolio review software · Compliance*

· Brokerage collection and distribution*.

* These components are more relevant to licence holders than advisers.


What components of software are

provided, or available as optional


What to look for:

You should explore whether you have a choice about the parts you use. If you are

only giving advice in a restricted capacity you may not need to use the entire

software package. Therefore, you will want to avoid paying for the entire package.

The licence holder requires additional components for fees, distribution and

compliance, but these are not components an authorised representative needs to

be too concerned about.

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4a. · If you are not computer literate, look for software that is easy to use. Also ensure the licence holder has adequate training and software to support you in this area, preferably on-site.

Client management system

The client management system (or Customer Relationship Management System - CRM) contains the database of your clients and their personal details. All CRM systems should be able to record key client data, including personal details, assets and investments. More sophisticated systems have the following capabilities:

· Links to diary functions

· Ability to include file notes

· Ability to attach documents to client records

· Sophisticated reporting based on client locations, funds invested, personal interests and particular investments

· Ability to send bulk letters/emails based on specific information (e.g. all clients with >


Portfolio review software

Once a plan has been developed, there should be a capacity to produce review plans, either at a set period or when required. Review software can vary in the quality of the review templates, flexibility to customise and ability to integrate with other packages such as Word.

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4b. · Sophisticated client management and review software allows a very professional service to be delivered to clients, particularly if your clients are predominantly high net worth and expect considerable 'value add' from their adviser.

· If you are not going to profile your clients in detail, be careful that you don't pay for fancy facilities that are of no use to the way you operate your business.

Investment tracking system

Your software should be able to automatically track your client's investments once initial details have been entered. These days, a large percentage of investments are held through a portfolio administration service (PAS) such as BT Wrap.


Integration of the PAS and software


What to look for:

It is important to ensure that the PAS can integrate with the financial planning

software for reporting purposes. There also needs to be the ability for

investments held outside the PAS such as direct property and equities to be

recorded and their values updated automatically.

Financial planning modelling software

While much of the software is about recording information and meeting compliance

requirements, the modelling software is where the guts of the planning takes place. Advanced modelling software will allow more complex calculations, and allow multiple scenarios to be developed across multiple and complex structures and investments.

Plan production software

Plan production software pulls together the information from the client management system, modelling software and investment tracking system. There should also be flexibility to integrate into the plan other documents from Word and even Excel.

The production software should ensure all plans include necessary disclosures and disclaimers for compliance, but not be so long that they take away from the tailored parts of the plan.


Flexibility in plan production software

What to look for:

Avoid software that only produces lengthy compliance related plans, focussed

on products. Financial plans should be tailored to the individual client and not

be so long that the specific client details and recommendations are lost.


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4c. · Think carefully about the type of clients you have and the types of information you want to include in the plan

· If tax planning is an important part of your practice, ensure the software has this capability and can handle multiple structures.

· If your clients invest directly, ensure the information can be automatically updated and integrated with any investments through Wraps and Master Trusts.

Systems compatibility and migration

Financial planning software should be tracking clients' investments automatically and therefore contain the most up-to-date information on a client's investment portfolio. If your practice also undertakes accounting work for your clients, such as preparing tax returns, it will be important to find financial planning software that can feed into your accounting software. The feeds should come from the financial planning software rather than the other way round.

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4d. · You should check whether client information from the financial planning software can be easily downloaded or transferred to your accounting software for reporting and taxation purposes.


For existing authorised

representatives changing over,

investigate whether client data can

be migrated to the new software

What to look for:

Software packages that have already undertaken data migration from your

existing software. Some software providers have special programs to assist with

the migration because they have created it for other licence holders who have

previously changed software.



As a planner, you will need to be equipped with up-to-date research on markets, products and economics to ensure that you are able to appropriately advise your clients. Licensees should provide you with access to the necessary research to perform your task as an adviser to your clients.


Integration between the software and

the research

What to look for:

Ideally, once a plan has been developed, you should be able to use online

research to make your product recommendations, which can be automatically

inserted into the plan.

Licensees must have access to research in order to fulfil the legal requirement to "know the product". How a licensee does this may vary. The most common approach is for a licensee to subscribe to research provided by one of many research houses. Some licensees may also have in-house analysts who perform similar functions and research markets, asset classes and products.


Research will help a licensee to determine such matters as the management approach of the fund manager (i.e. what is their approach among the four broad styles of management growth, value, growth-at-a-reasonable price and style-neutral), performance of the various asset classes over time and performance of a particular product.


Are there any model portfolio


What to look for:

For those less experienced or interested in selecting individual products, some

research will provide recommended portfolios based on a mix of managers.

A wide range of model portfolios would include more than five options.

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4e. · Will the research facilities meet your initial and ongoing needs to provide information on products you will be recommending to your client/s?

· Do you have any choice in the level of research material obtained from the


· Can you access the research information via the internet?

· Is there a phone service available if you want to talk directly to a researcher?



Paraplanners offer two types of service – technical support for plan construction and back office administrative support. The former type of paraplanners are increasingly common in the financial planning industry. There are licensees who offer this service to their representatives so that the representative's time is dedicated to meeting and building a relationship with the client. In practice the service operates with the adviser meeting with the client and gathering the client's particulars and establishing an idea of the type of advice the client will need. These details are forwarded to the paraplanner along with some parameters for the type of advice required and the paraplanner develops a plan for the adviser to present to the client.


Turn-around times for plans.

What to look for:

Good services have a turn-around time of fewer than five days.

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4f. · Not all licence holders offer this service. If you want support writing plans, check that there is a paraplanning service. You should also check the qualifications of the paraplanners.



Administration back-up

It is possible that you have administrative support in your office that is involved in a part of the financial planning process. They may be involved in things like maintaining client details, printing plans and entering data. If this is the case, these administrative staff may also need some support from the licence holder. The most common form of support is access to, and training on, the software.

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4g. · Ask what support is available for administrative staff, and what cost is involved (it should be at a reduced rate to anauthorised representative).


Other support services

The level of support needed by an authorised representative is possibly the most varied criteria and depends on your level of experience and knowledge in this area and your existing networks. For new advisers your most direct source of support is likely to be a Business Development Manager (BDM) assigned to your practice.


The number of BDMs.

What to look for:

If you expect to get a reasonable amount of support, you would ideally be

looking for a ratio of one BDMS to no more than 75 planners (preferably no more

than one to 50 planners).

Also investigate whether advisers are allocated a dedicated BDM or how

advisers access various services, what regularity of visits there are and what

problem resolution systems are in place.

Location of offices

Some licence holders that operate in more than one location may have offices throughout Australia. Others may service their planners from interstate. This may be appropriate, depending on the support needed and number of planners in each location.

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4h. · If you live in a regional or rural location find out where your BDM is based and how many other areas they service.

· If there is no local state office find out how you will be serviced. Also, check the opening hours of any hotlines to see if you are affected by time zone issues.


Technical support

You should expect to get some technical support from your licence holder. Licence holders may publish technical updates, have a website facility for searching information and/or a hotline to contact someone with a specific query.


High levels of free support

What to look for:

Licence holders will only offer a loss-making service if they can make their profit

elsewhere – via the sale of products or from margins on investment funds. If

you are getting a high level of technical support for free there may be an

underlying pressure to sell products and/or meet funds under management



Support for general inquiries

What to look for:

A hotline for queries, with a turn-around time of less than 24 hours on urgent


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4i. · You may have resources in-house or from other sources so technical support is not something you are seeking from a licence holder.

Practice development and management

Many of the larger licence holders offer practice development management. Practice development support is important for start-up practices and provides specific support to build your practice and deal with integration issues when adding financial planning to your business. Practice management support provides assistance in developing systems and procedures within your practice. This type of support is either offered by the BDMs or as a separate 'user pays' service.

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4j. · If you have little or no experience with financial planning it is strongly

recommended that you get some practice management support, either through your licence holder or directly to ensure the venture is successful.


As it is in the licensee’s interest to have a consistent set of stationery, you may find that the licensee supplies you with stationery, which may include letterheads, business cards and requirements for signage. There is considerable emphasis placed, not only on the type of information contained in stationery, but on the size and relationship to other business names to ensure the licence holder name is always more dominant. Stationery must not give the

impression that the person with whom they are dealing is anyone but the licence holder.


Do you provide your authorised

representatives with stationery?

What to look for:


no stationery is provided by the licence holder you will need to ensure that

disclosure is made of your authorised representative number (allocated by

ASIC) and that the licence holder with whom you are associated appears on all

stationery used(i.e. business cards, letterhead, etc.).



Fees and charges

Fees are possibly one of the most complex areas to compare between licence holders. Several options are listed below.

· A set fee to join, which may include set-up costs for software/hardware

· An annual dollar based fee

· A percentage commission on products sold (normally, this is a sliding scale, which could start at 50/50 and move to a 95/5 or even higher)

· A percentage of all fees and commissions on money placed in a Portfolio Administration Service, which is normally on a sliding scale (i.e. Wrap or Master Trust).

· A 'pay per use' charge for services

· A percentage of all fees received from clients, regardless of product sales.


How the licence holder makes their


What to look for:

If a licence holder does not take a cut of any business written, their annual fee

should be considerably higher ($15-20,000 plus).

If the fee seems particularly low compared to other licence holders, explore why

this is the case. It could be that the licence holder is receiving payments in

some other way or that the services and support may be restricted.

An increasing number of licence holders are making their money from investments placed in Platforms such as Wraps and Master Trusts. Some licence holders don't take a cut directly from business placed in a Wrap or Master Trust because they have a separate arrangement with the Wrap provider. In these instances you may see a higher fee charged by the Wrap provider to cover the arrangement.


The fees on Wraps and Master

Trusts, and check how much does

the licence holder make from these


What to look for:

You should know exactly how much your licence holder is receiving as a result

of any business you place in a Wrap or Master Trust so you can make an

informed decision about whether the fees are reasonable for both you and the

client. Ask what the total fee is to the client (i.e. 1.5%, and whether the licence

holder gets any share of this, either directly through any fees or dial-up

arrangements you have or indirectly through an arrangement with the Wrap


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5a. · Find out what all the fees and charges are or commission split arrangements..

· It might be easier to compare by calculating all fees, charges and

commissions, based on a likely scenario of clients/ business written in a year.



Reputation issues & legal responsibilities


Compliance requirements

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. In such a situation, you would no longer be able to provide advice until you selected another licence holder, which could have a significant impact on your clients and reputation.

There are a number of compliance obligations that are fundamental and are reflected in the law. Such requirements include the need to give a client a Financial Services Guide (FSG),

Statement of Advice (SOA), disclosure obligations and the obligations to ensure you are familiar with both the client and their needs and goals and with the strategy and/or products you

recommend to the client.

Compliance checklist of issues for an Authorised Representative Financial Services Guide (FSG)

This guide must be issued by anyone who provides a financial service to a retail client. The obligation for an authorised representative to provide the Guide is covered under

s 941B of the Corporations Law. Fact Finder Questionnaire

This document is a necessary tool for analysis of your clients' financial affairs (i.e. goals,

objectives, current and future financial needs). It is an important document as it forms the basis for making product recommendations to your client/s and is evidence of the issues discussed to meet your obligations under the Corporations Act - (i.e. "know your client", "know your product"). Statement of Advice

A statement of advice (SOA) is a disclosure document that helps a retail client understand and decide whether to rely on the personal advice provided by a representative of a licensee. A statement of advice must be provided by an authorised representative to a retail client where personal advice (not general advice) is given to a client (section 946A of FSRA).


Is the ‘fact find’ or ‘client data

collection form’ sent to the client for

completion prior to their


What to look for:

Whether the licensee operates by sending the ‘fact find’ form out to a client

before an appointment may have a bearing on the manner in which you prefer to

operate. It is often more beneficial to have a client complete this information at

home to ensure they arrive with as much useful information about their

circumstances and current financial position as possible.


Does the licensee provide for a client

sign-off on the accuracy of

information provided?

What to look for:

It is prudent for clients to sign-off on the accuracy of the information they have

provided to the authorised representative as this helps to ensure that they

haven’t left any information out. Such information may have a material effect on

the type of advice you will offer.


Cross Endorsed Authorisation

The law allows one person to be authorised to represent two or more licensees (section 916C). However, this is only possible if each of the licensee's has consented to the person being an authorised representative of each of the other licensees or if each of the licensees is a related body corporate of each of the other licensees.

It may be appropriate for your circumstances to address this issue with a potential licensee to determine whether this type of arrangement may assist you in providing services to your clients. You may want to provide your clients with something unusual that only a small number of licensees provide (i.e. like some tax effective investments into agricultural schemes). Therefore the ability to represent two or more licensees may enable you to offer this service.


Are cross-endorsed authorisations

permissible from a licence holder?

What to look for:

If you are considering cross-endorsement investigate what the separate

requirements will be from each licence holder for:


disclosure obligations


requirements for the use of software and research


training requirements


compliance and reporting requirements.


Compliance audits

It is common for a licensee to conduct compliance audits on its representatives. This is designed to ensure the licensee can discharge its obligations under its licensee and to ensure that any breaches of the law or potential exposure to liability is discovered and remedied. Audits also focus on the quality of the advice being given to clients.

Audits can be conducted in a number of different ways. Some licensees will have in house compliance resources while others will have outsourced this activity to consultants who are well versed with the requirements.


How frequently are compliance audits


What to look for:

For a licence holder to meet their licence obligations you should expect to be

audited at least twice a year, with random spot audits as well. You should also

be wary of licence holders that combine the business development and

compliance audit function.



A licensee is required to have an internal complaints handling process in place. Additionally, a licence condition applied to all Australian Financial Services licensees requires that licensees who give advice to consumers must belong to an external dispute resolution scheme approved by ASIC. The approved scheme that currently covers the provision of financial services advice is the Financial Industry Complaints Service (FICS).



The external dispute resolution


What to look for:


Has the licensee obtained membership of an ASIC approved external disputes resolution (EDR) scheme? (i.e. Financial Industry

Complaints Service - handles unresolved internal client complaints)

Profiling tool reference

Explore or consider

6a. · What internal complaints procedures are you expected to have in place? If you already have procedures in place, are they satisfactory for your licence holder?



Other considerations


PI cover

If you are a public practitioner you will already be familiar with the requirement to have

Professional Indemnity insurance to cover your activities as an accountant. However, this cover will almost certainly not extend to any activities that include advice about financial products under the Financial Services Reform Act 2001. You will therefore need to ensure that the licensee you choose has sufficient cover in place that is appropriate for the activities you will be undertaking.


Will you be covered under your

Professional Indemnity Policy (PI) for

providing advice?

What to look for:


It is common for licensees to have a blanket PI cover in place for its

representatives and authorised representatives (particularly since under the

Corporations Act the licensee is responsible for the actions of its


An authorised representative may also be required to take out a policy in their own name. Issues to consider are:

· The type of advice will you be providing

· The amount and type of coverage you will require in taking out a PI Policy

· Any inclusion or exclusion clauses in the PI Policy that affect your coverage

· Any pay-out limits on either initial or subsequent claims

· If the licensee has any particular or stipulated requirements for policy extensions.

Has the licensee obtained membership of an ASIC approved external disputes resolution (EDR) scheme? (i.e. Financial Industry Complaints Service – handles unresolved internal client



AR agreement

This is an agreement that will be struck between you (the authorised representative) and the licensee (the organisation or individual, if natural person licensee), who is ultimately responsible for the advice you provide to clients.

The agreement should cover all of the following issues:

· scope, term and remuneration

· sub-authorisations, warranties

· training requirements, licensee obligations

· access to premises, information, ownership

· control of information · buyer of last resort options*

· restraints, indemnity insurance, termination, reporting requirements, dispute resolution

* CPA Australia APS 12 – Statement of Financial Advisory Service Standards states that alternative remuneration benefits, including soft dollar received from third parties that place the interests of the member in significant conflict with those of the client must be avoided due to their potential to undermine the independence and professionalism of the advice. This includes buyer of last resort arrangements.



What is the content of an


What to look for:


Have you made thorough inquiry of any potential licensee you approach of

the terms you will be bound by under an Agreement?


Have you considered the likely impact of any restrictions which will be

placed upon you as an authorised representative under an Agreement?


It is permissible for a licensee to draft an agreement in such a way as to

provide the licensee with indemnity against liability for the acts of the

representative – however such agreements can be difficult to enforce.

Profiling tool reference

Explore or consider

7a. · Consider how easy it would be to unwind an agreement in the event of a desire to do so on your part or on the part of the licensee. (Note: You should consider seeking independent advice before entering into any agreement with a


· Also find out the licence holder’s attitude on ‘who owns the client’. This relates to the arrangements like access to clients and client files in the event that you are no longer an authorised representative.





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