If you are an existing adviser, you have until the end of 2020 to pass the adviser exam.

I have had a few advisers ask me this same question lately: “Can I dodge the exam and retain my business after 1 January 2021 by employing a financial adviser to service new and existing clients while I take a back seat and run my business as a director of my (corporate authorised representative) company.”

The answer is NO.

Licensees will prevent that situation from ever arising. They will require that you be personally authorised to retain your clients and to be paid.

Clients have to be protected in the event that your employed adviser leaves your company, takes holidays or in some way becomes incapacitated to perform the job. Clients cannot be orphaned these days.

Also, would it be in the best interests of your business to employ an adviser who has full control over advice provided to your clients while you legally have none?

The brutal truth is that if you are removed from the adviser register on 1st January 2021, your Licensee will have no option but to redistribute your clients if you haven’t sold your business by then.

At the moment, which ever way you turn, it appears you are faced with a n0-win option. You won’t be able to stay on the adviser register after 1 January 2021 if you don’t pass the adviser exam; and the price you can expect should you be successful in selling your business between now and then will be heartbreaking.

Supply of commission-based books of business is high and rising as advisers exit the industry. Demand is low because what is for sale is rapidly diminishing. Therefore, prices continue to be driven down.

A much better option to consider is to prioritise the time to study for the adviser exam and then either:

(a) retain your clients, work on a new advice model and rebuild your business, or

(b) sell your business in 2-3 years time before the educational upgrade deadline arrives in 2024 (no guarantee of a better price then).

To continue a profitable business after 2020 will mean a complete re-think of how you provide your financial services.  The commission-based remuneration model is already in its death throws as grandfathered commissions are set to disappear in less than 17 months time; and insurance commissions will continue to be squeezed.

No adviser will survive even in the medium term by selling products alone.  Advisers will have to shift their mindset to selling advice.  But the transition will not be an easy one.  It is not as simple as jumping across to fee for service.  Besides the fact that almost no one will pay a fee for risk insurance (for which they have to pay ongoing premiums as well), you can’t create a fee for service model out of thin air.

It will require some heavy duty planning to build your marketable service package and price it.  Then there is the age old question of who is it targeted at, and who will buy it.  And the most critical question is what special expertise or service offering will distinguish you from the sea of advisers in exactly the same position as you, who also can’t distinguishable themselves from the rest?

So passing the adviser exam is the first step in a serious business rebuild, or a business sale at a slightly more opportune time after 2021.