Written byAn Australian financial services licence (AFSL) is the licence ASIC issues to a business that provides financial services, such as advice on or dealing in financial products, in Australia.
Also known as: AFSL, AFS licence, Australian financial services licence, financial services licence, AFSL number
Key points
- An AFSL covers financial products such as insurance, super, shares and managed funds, not consumer credit, which needs an Australian credit licence.
- Licensees must give retail customers a financial services guide, belong to AFCA and hold professional indemnity cover.
- A business can operate under someone else's AFSL as an authorised representative, which is how many brokers and dealers arrange insurance alongside finance.
- ASIC's professional registers show every licensee and representative; a licence is not an endorsement of the business or its products.
What an AFSL covers
Chapter 7 of the Corporations Act requires anyone carrying on a financial services business in Australia to hold an AFSL or be authorised under one. Financial services include giving financial product advice, dealing in a financial product, making a market, operating a registered managed investment scheme and providing custodial services. Each licence lists the specific services and product classes the holder is authorised for, and whether it can serve retail as well as wholesale customers.
ASIC assesses an applicant's competence, financial resources and compliance arrangements before granting a licence, and the obligations continue afterwards: acting efficiently, honestly and fairly, managing conflicts of interest, keeping staff trained, and maintaining dispute resolution and compensation arrangements. Retail customers must receive a financial services guide before a service is provided and a product disclosure statement before they buy.
AFSL and credit licence: two different regimes
Credit is regulated separately. A broker who arranges car loans, personal loans or home loans for consumers needs an Australian credit licence under the NCCP Act, or must be a credit representative of a licensee. Business-purpose lending falls outside that Act's licensing rules altogether. None of this requires an AFSL, and holding an AFSL does not authorise anyone to provide consumer credit.
The two regimes meet at the edges. A finance broker who also recommends or arranges an insurance policy is providing a financial service and needs an AFSL, an authorisation under one, or an exemption that fits the situation. Many larger brokerages and dealer groups hold both licences, while smaller operators are credit representatives for finance and authorised representatives for insurance under two separate principals.
Where an AFSL appears in asset finance
The most common point of contact is insurance sold with a vehicle or equipment loan. Comprehensive cover, gap insurance and consumer credit insurance are financial products, so the dealer or broker offering them must be licensed or authorised. Add-on products such as gap and consumer credit insurance also carry a four-day deferred sales period after the car is bought; comprehensive cover is exempt from that rule. Accountants are the other frequent case: since 2016 an accountant who recommends setting up a self-managed super fund, for example to hold business premises or equipment, needs an AFSL or an authorisation to give that advice.
Referring a customer to a lender or broker is treated differently again, and referrers who only pass on contact details generally operate under specific exemptions in the credit rules rather than under either licence.
Example
A caravan dealership in Mandurah arranges finance for buyers as a credit representative under an aggregator's Australian credit licence. Customers keep asking the sales team to sort out comprehensive cover at the same time. Arranging a policy is a financial service, so rather than quoting informally the dealership becomes an authorised representative of an insurer's AFSL for general insurance only. Each buyer now receives the insurer's financial services guide, staff sell only within that authorisation, and the dealership keeps the finance file and the insurance file separate because two different licences, and two sets of obligations, apply.
Not to be confused with
- Australian credit licence (ACL)
- an Australian credit licence authorises consumer lending and broking, while an AFSL authorises financial services such as insurance and investment advice
Frequently asked questions
Does a finance broker need an AFSL?
Not for arranging loans. Consumer credit broking is licensed under the National Consumer Credit Protection Act through an Australian credit licence or credit representative status. An AFSL, or an authorisation under one, is needed only if the broker also advises on or arranges financial products such as insurance or superannuation.
How can I check whether a business holds an AFSL?
ASIC's professional registers on ASIC Connect list every AFS licensee and authorised representative, with the licence number and the services it covers. A licensee's financial services guide also states the licence number. The check confirms the licence exists; it does not tell you whether the advice or product suits you.
What is the difference between an AFSL and an ACL?
An AFSL covers financial services and financial products under the Corporations Act. An Australian credit licence covers consumer credit activities, such as lending and broking, under the National Consumer Credit Protection Act. They are issued separately by ASIC, carry different obligations, and a business that does both needs both.
What is an authorised representative?
A person or company authorised by an AFS licensee to provide financial services on the licensee's behalf. The licensee remains responsible for the representative's conduct and must ensure they are trained and supervised. It is the usual route for a dealer, broker or adviser who does not hold a licence in their own right.
Does an AFSL mean ASIC has approved the business?
No. ASIC grants a licence after checking that the applicant meets the competence, resource and compliance requirements at that time. It does not vet individual products or advice, and licensees are not permitted to suggest that ASIC endorses them. Investors and customers can still lose money dealing with a licensed business.
Related terms
ASIC
ASIC is the Australian Securities and Investments Commission, the regulator for companies, markets, financial services and consumer credit, which licenses providers, keeps public registers and enforces conduct laws.
Read definitionAustralian credit licence (ACL)
An Australian credit licence (ACL) is the authorisation from ASIC that a business needs to provide consumer credit or credit assistance under the National Consumer Credit Protection Act.
Read definitionFinancial services guide (FSG)
A financial services guide (FSG) is the plain-language disclosure document a licensed financial firm gives retail clients, explaining its services, how it is paid and how to complain.
Read definitionProduct disclosure statement (PDS)
A product disclosure statement (PDS) is the document a product issuer must give a retail customer before they buy a financial product, setting out its features, risks, fees and costs.
Read definitionAustralian Financial Complaints Authority (AFCA)
The Australian Financial Complaints Authority (AFCA) is the free, independent body that resolves disputes between consumers or small businesses and the lenders, insurers and financial firms they deal with.
Read definitionBroker
A broker is a licensed intermediary who connects borrowers with lenders, comparing finance options across a panel of lenders and submitting applications on the borrower's behalf.
Read definitionGo deeper
Sources
This article is general information only and is not financial advice.