In most cases, you have the option of holding your own AFSL or becoming an Authorised Representative of another AFSL holder.
Is holding an AFSL better than being an Authorised Representative? The answer – it ultimately depends as there are pros and cons of each option.
Holding an AFSL
- The AFSL holder has ultimate flexibility on all aspects of the business and is not subject to any restrictions or approval requirements that may apply to an Authorised Representative.
- The AFSL holder is subject to a higher compliance burden given it is ultimately responsible for complying with the AFSL regime.
- Obtaining an AFSL takes approximately 6 months. If getting to market as soon as possible is a priority, then becoming an Authorised Representative may be preferable given no regulatory approvals are required.
Becoming an AR
- An Authorised Representative is subject to the directions and restrictions of the AFSL holder. These restrictions are defined in the AR Agreement, but can extend to both significant matters (i.e. ownership of clients, engaging third parties, business practices) as well as day-to-day activities (i.e. marketing material, billing clients, appointing representatives) which require the AFSL holder’s approval.
- An Authorised Representative is usually subject to a reduced compliance load given they follow the policies and procedures which are prescribed by the AFSL holder.
- An AR fee is payable for being an Authorised Representative. This is usually a fixed fee, but can vary and be pegged to other benchmarks such as funds under management or asset management fees.