Want to move financial planning licensees? How to prepare

Industry changes following the Royal Commission report are prompting a growing number of financial planning advisers to move licensees.

But before you can move, you need to completely digitise your documentation. This will be a requirement for both leaving your old licensee, and for helping your new licensee to do their due diligence on your business.

You need to quickly and easily get your data management systems up to date. Here's how you can make that happen.

A growing number of financial advisers are switching licensees

Following the Royal Commission's shakeup, the financial planning industry is in a state of flux. Licensees can no longer subsidise the costs of running a business with product fees the way they traditionally did. As a result, many are changing their pricing model to compensate.

The subsequent rising costs and a wish for more control are prompting many advisers to move financial planning licensees. But transitioning to a new licensee may not be the straightforward task it sounds like.

Let's take a closer look at the reasons for switching licensees, and what Umlaut can do to help.

Why financial advisers join licensee groups

As a financial professional, you don't have to be part of a licensee group. To be able to give financial advice, you just need to hold an Australian Financial Services (AFS) licence, or be employed or authorised by a business that holds a licence.

However, as a general rule, the Australian Securities and Investments Commission (ASIC) issues licences to dealer groups, rather than to individuals. Around 25,000 financial planners currently operate in Australia, with a significant proportion operating under a licence issued by a financial institution.

One of the main benefits of being part of a dealer group, otherwise referred to as 'being under a licensee', is that it makes it easier and cheaper to get a licence.

A licensee also generally covers insurance costs, which can be a significant saving. Since the Royal Commission report, professional indemnity insurance rates have risen substantially, and many independent advisers struggle to get coverage.

Additionally, licensees generally cover education, support and training for their advisers. Plus, you get peace of mind that you're compliant and meeting your legal responsibilities.

So there are definite advantages to being part of a licensee group — yet a steady stream of advisers continue to move between licensees each quarter, with the majority shifting from institutional or aligned licensees into larger, privately-owned groups.

Why do financial planners move licensees?

The reasons will vary between advisers, but here are some typical reasons for moving licensees:

• Forced switching: some major institutions have chosen to leave the financial adviser licensing business, leaving their advisers to find a new licensee.
• Increased costs: as a licensee restructures their costs, it often becomes more expensive to be an adviser under them, which can make switching to a new licensee more attractive.
• More independence: many advisers see moving to a smaller, non-bank-controlled licensee as a way to become more independent and gain greater freedom in the products they can recommend.

However, moving to a new licensee isn't always a simple process.

What you need to do in order to move

Before you can move to another licensee, you need to have all your records up to date. You also need to be able to present detailed business performance information beyond your basic P&L and balance sheet.

Most licensees require you to have everything digitised, audited and checked before you leave and receive your final payment.

And your new licensee will also require you to have everything digitised so they can carry out due diligence on your business. They'll want to see the size and quality of your book, and will be looking for proof of strong past revenue and good practices. They'll also want to see your plan for taking your business into the future.

But if you're like most advisers, you probably have all that information in paper files stored in boxes in your spare office or storage. Or, if your records are digital, they may be scattered across Dropbox, Google Drive, or various hard drives.

Setting up good data management now makes leaving your current licensee simpler, and helps you put your best foot forward with a new licensee.

How Umlaut can help with the transition

Umlaut are the experts at wrangling financial advisers' data into shape. While we have a range of solutions that can help, our data migration and advisor form services will have the most impact if you're looking to move to a new licensee.

• Phoenix: our Phoenix service is designed to take the hassle out of digitising, filing and mapping old records. We take care of the archive boxes full of paper files and the hard drives full of old digital records, scanning, sorting and organising your data into an Xplan System of Record so it's complete, accurate and secure.
• AdvisorForms: AdvisorForms provides customisable online forms that clients can fill in directly. Once you approve their data, it feeds straight into your System of Record, such as Xplan. This streamlines client interactions, avoiding the wasted time and mistakes that manual data entry can cause, and improves your client's experience.

These solutions will help you comply with your existing licensee's requirements, and make your practice more valuable to your new licensee. They'll also help you keep complete and accurate client records in line with your professional obligations.

Get your records up to date with Umlaut

If you're one of the many advisors looking to move financial planning licensees, getting your record-keeping system current and accurate is vital. Umlaut will help create order from your chaos.

Get in touch with us today.