Your Own AFSL and Retirement
Recently some of our advisers have been looking to purchase advice businesses’. We have come to realise that what people are not told about having their license is, how the end game will affect them.
Potential buyers won’t purchase an AFSL. The AFSL holds all the risk and is responsible for any past poor advice. The buyer won’t want to take on this risk. Instead they will purchase the client base at commercial terms. Sound good?
As the owner and responsible manager of the AFSL your liability for the advice will last for 7 years after you have sold the business. You need to get run-off professional indemnity cover to offset the risk.
Getting run off cover can be an issue. In most cases the cover is likely to only last 12 months and you will need to renew each year. It gets worse, if you have a claim you may not get renewed and be left with the liability for the remaining years.
Finally, it’s not cheap and it does not get that much cheaper over the 7 years even though the chances of a claim are diminishing.
Where does this leave you? The value of your retirement dollar from the sale of the business is now being eaten up each year by the cost of the run off cover. You’re still at risk that a claim can happen, and heaven forbid if you get more than one claim you are now running the risk of not being covered and are putting your life’s savings and retirement at risk.
Think about the end before you decide to get your own AFSL, it may cost you more in the long run and not be as enticing as you may think.
There is an alternative that retains the options and flexibility in having your own AFSL, however removes you from the compliance side of running your own AFSL.
Insight Investment Services is a small boutique licensee with a 11 year history. A history that has an untarnished reputation.
Contact us for more information on how you can benefit from being associated with a boutique AFSL.
Ph 07 3018 0400 and ask for Paul Kelly.