Do You Need An AFS Licence?

General information only: This article is general information for Australian businesses and isn’t legal, financial or accounting advice. Whether you need an AFS licence (AFSL) depends on your exact product, customer journey, disclosures and business model. If you’re unsure, get tailored advice before you launch or scale.

If you’re building a fintech product, offering “wealth” features in an app, running a brokerage-style business, or even just giving customers financial guidance as part of your service, you’ve probably heard the phrase AFS licence (also known as an Australian Financial Services Licence or AFSL).

And if you’re like most startups and small business owners, your next thought is usually: Do we actually need one?

This question matters, because in Australia, offering “financial services” without the right authorisation can expose your business (and potentially its directors) to serious regulatory risk. On the other hand, plenty of businesses operate legally without holding an AFS licence - as long as they stay within the boundaries of what they’re allowed to do.

Below we’ll walk you through what an AFS licence is, what kinds of activities can trigger the requirement, common startup scenarios, and practical options if you’re not ready to apply for an AFS licence yet. We’ll also flag a few related regulatory regimes that often come up alongside AFSL questions (like Australian Credit Licence, AML/CTF, and managed investment scheme registration).

What Is An AFS Licence (And Why Does It Matter)?

An AFS licence is an authorisation issued by the Australian Securities and Investments Commission (ASIC) that allows a person or business to legally carry on a financial services business in Australia.

In plain English: if your business provides certain financial services (like giving financial product advice, arranging financial products, dealing in financial products, making a market, or operating certain investment structures), you may need an AFS licence - or you may need to be authorised under someone else’s licence.

Why Startups And Small Businesses Need To Take This Seriously

AFS licensing isn’t just a box-ticking exercise. It affects how you design your product, market your services, contract with customers, and manage compliance on an ongoing basis.

From a commercial perspective, the AFS licence question often comes up when you:

• launch a fintech MVP and want to go to market fast;
• start charging for “advice” or “recommendations”;
• integrate investments, crypto, payments, or lending-like features;
• partner with a provider that expects you to hold certain authorisations.

It’s also common for businesses to assume “lending = AFSL”. In many cases, consumer or small business lending/credit activities are regulated under the Australian Credit Licence (ACL) regime (not the AFSL regime), although some models can involve both regimes (or additional obligations) depending on how the product is structured.

If you’re unsure where your business sits, it’s worth getting tailored advice early - it’s usually much easier (and cheaper) to structure your offering correctly from day one than to unwind a non-compliant product later. An AFSL advice consult can help you map your activities against the licensing requirements before you scale.

When Do You Need An AFS Licence? The Core Triggers To Know

You generally need an AFS licence if you are carrying on a financial services business in Australia. That phrase has a specific meaning under the law, but practically, it often comes down to what you are doing (or promising to do) for customers.

Common financial services that may trigger an AFS licence requirement include:

• Providing financial product advice (including general advice or personal advice) about financial products;
• Dealing in a financial product (for example, arranging for someone to acquire, dispose of, or vary a financial product);
• Making a market for financial products;
• Operating a registered managed investment scheme (or being involved in operating an investment scheme that needs to be registered);
• Providing custodial or depository services (holding assets on behalf of others) in some scenarios.

There are also exemptions and carve-outs that may apply in some situations (for example, certain limited dealing activities, referrals, or advice that is genuinely outside the financial product advice definitions). These are very fact-specific, so it’s important not to rely on a “rule of thumb” without checking how your specific model fits.

What Counts As “A Financial Product”?

This is where it can get tricky. “Financial product” can include more than people expect, such as:

• shares and other securities;
• managed investment schemes;
• superannuation products;
• insurance products;
• derivatives;
• some payment and non-cash payment facilities.

Whether something is a financial product (and whether you’re actually providing a “financial service” in relation to it) depends heavily on the facts - including how your product works and how you describe it in marketing and customer communications.

A Common Trap: “We Only Provide Education”

Many businesses say they only provide education or general information. That can be fine - but the line can blur quickly if you:

• recommend specific products, providers, or strategies;
• suggest what a person “should” do;
• rank products or show “best picks” based on a user’s circumstances;
• nudge a customer toward a particular financial decision based on their inputs.

The more your content looks like advice intended to influence financial decisions, the more important it is to assess whether you’re crossing into licensed territory.

Common Startup And Small Business Scenarios (And Where The Risk Usually Sits)

Startups don’t always think of themselves as “financial services businesses” - especially if you’re building software or providing a platform. But licensing obligations can still come up based on what your platform enables users to do.

1) Fintech Apps With Investing Features

If your app lets users invest, buy or sell financial products, or automatically allocate funds based on user preferences, you may be “dealing” in financial products or providing financial product advice - even if you position yourself as a tech platform.

Key questions include:

• Are you merely providing software, or are you arranging transactions?
• Are you giving users general information, or recommending a product/strategy?
• Do you earn fees linked to transactions or product uptake?

2) “Robo-Advice” Or Algorithmic Recommendations

If your product asks users questions and then outputs a recommendation, portfolio allocation, or “next best action,” you may be providing financial product advice.

Even if you call it “general advice,” there are still compliance considerations - including how you present disclaimers and the context in which advice is given.

3) Comparing Financial Products Or Providers

Comparison websites and lead-gen businesses need to be careful about how results are displayed and described. Some models can fall outside licensing requirements, while others can look like financial product advice or arranging financial products.

Also remember that your advertising and representations should be accurate and not misleading. Many businesses build consumer trust (and reduce disputes) by using clear, well-drafted Website Terms and Conditions that explain what the business does (and doesn’t) do.

4) Accountants, Consultants, Coaches And Agencies

Many professional services businesses talk about money as part of their service offering. Not all of this is regulated financial product advice, but it can become an issue when you move from:

• business strategy or budgeting guidance (often lower risk), to
• recommendations about financial products (higher risk).

If you’re bundling “financial advice” into a broader consulting package, it’s important to be clear on your scope and to use the right customer-facing documents. Depending on your model, a tailored Service Agreement can help set expectations around deliverables, limitations, and what the customer is responsible for deciding.

5) Crypto, Digital Assets And Web3 Projects

Crypto is a fast-moving area and the regulatory position can be complex. Crypto assets are not automatically “financial products” in Australia - but some crypto-related products and features can fall within the financial product/financial services regime depending on how they work (for example, if the arrangement is structured like a managed investment scheme, a derivative, a facility for making non-cash payments, or another regulated product).

If you’re launching a token, operating an exchange-style product, providing custody, or offering “staking” or yield-like features, it’s worth getting advice early to understand what licensing, disclosure, and compliance obligations may apply. Depending on your model, you may also need to consider AML/CTF obligations (anti-money laundering and counter-terrorism financing), particularly where your business provides designated services such as certain exchange, payment or value transfer activities.

If You’re Not Ready For An AFS Licence: Practical Options

It’s normal for early-stage businesses to feel stuck here. An AFS licence can be a significant operational commitment - and it may not be realistic while you’re still validating product-market fit.

The good news is that there are often practical pathways forward, depending on your model.

1) Adjust Your Product And Messaging To Stay Outside “Financial Services”

Sometimes you can legitimately operate without an AFS licence by re-scoping what you do. For example, you might:

• focus on general education and avoid product recommendations;
• remove features that “arrange” transactions and instead link out to licensed providers;
• change language that suggests advice (for example, “you should invest in…”);
• ensure any calculators/tools are framed appropriately and do not output recommendations.

This isn’t about adding a disclaimer and hoping for the best. It’s about designing the product and customer journey so it genuinely sits outside regulated activity.

2) Become An Authorised Representative (AR)

Another common approach is to operate under an existing AFS licensee by becoming an authorised representative. This can allow you to provide certain financial services without holding your own licence (subject to the scope of authorisation and the licensee’s conditions).

This option can be commercially attractive, but it’s not “set and forget.” You’ll usually need to align with the licensee’s compliance frameworks, training, monitoring, reporting, and contractual requirements.

3) Partner With A Licensed Provider (Carefully)

Some startups work with licensed partners (for example, product issuers or platforms) so the licensed party delivers the regulated service and the startup delivers the technology or customer experience.

This can work well, but you need to structure the relationship carefully so:

• each party’s role is clearly defined;
• your marketing does not overstep into “advice” or “arranging” activities if that’s not intended;
• liability and responsibilities are allocated properly.

In these partnerships, strong contracts are essential - including clarity on who owns IP, who handles customer complaints, and who is responsible for regulatory compliance in each part of the product flow.

4) Apply For Your Own AFS Licence

If financial services are core to your business model (and will remain core as you scale), applying for your own AFS licence may be the right long-term move.

It’s worth thinking about licensing as a strategic decision, not just a legal hurdle. An AFS licence can help you:

• build trust with customers and partners;
• unlock distribution channels that require licensed status;
• operate with more control (rather than being dependent on another licensee).

But it also comes with ongoing compliance obligations, which we’ll cover next.

AFS Licence Compliance: What Your Business Needs To Be Ready For

Holding an AFS licence generally means you need to operate with “systems” - not just ideas. ASIC expects licensees to meet organisational competence, compliance, dispute resolution, and risk management obligations.

While the exact requirements depend on what authorisations you’re applying for, common readiness areas include:

People And Competence

• Having responsible managers with appropriate skills and experience;
• Ensuring staff are trained and supervised appropriately;
• Clear reporting lines and accountability.

Compliance Frameworks And Policies

• Documented compliance procedures and monitoring;
• Appropriate record-keeping;
• Managing conflicts of interest;
• Marketing and disclosure controls so customers are not misled.

Customer Documents And Communications

Even before licensing, your customer-facing documents matter because they shape expectations and your risk exposure. Depending on what you offer, you may need documents like:

• Customer Terms setting out the scope of your service and limitations;
• Privacy disclosures if you collect personal information (most startups do);
• Complaints handling processes that reflect your operational reality.

If your business collects personal information through a website or app (for example, account details, ID verification data, or behavioural analytics), a properly drafted Privacy Policy is usually a must-have foundation document.

Corporate Structure And Governance

Fintechs and regulated businesses often grow fast, raise capital, and bring on co-founders, investors, and advisors. If that’s you, it’s worth getting your governance right early.

Depending on your stage, you might consider documents such as:

• Company Constitution to set the internal rules for how the company runs;
• Shareholders Agreement to manage decision-making, exits, and what happens if co-founders disagree;
• Clear board processes and delegated authorities so responsibilities are documented.

Getting these pieces in place won’t automatically mean you’re “licensed-ready,” but it can make your business far easier to operate, fund, and scale - especially when compliance obligations increase.

Key Takeaways

• An AFS licence is required if your business is carrying on a financial services business in Australia, which can include providing financial product advice or dealing in financial products.
• Many startups unintentionally trigger AFSL issues through product design and marketing - especially where tools output recommendations or facilitate transactions.
• If you’re not ready to hold your own AFS licence, options may include narrowing your scope, becoming an authorised representative, or partnering with a licensed provider (with the right contracts in place).
• Holding an AFS licence comes with ongoing compliance obligations, so it’s important to assess operational readiness - not just whether you can “get the licence.”
• Some business models may also trigger related regulatory regimes (such as the Australian Credit Licence regime for credit activities, AML/CTF obligations, and managed investment scheme registration requirements), so it’s worth checking the full regulatory picture.
• Clear customer terms, privacy compliance, and strong governance documents can reduce risk and support growth as your product and regulatory footprint expand.

If you’d like a consultation on whether your startup or small business needs an AFS licence (and how to structure your offering), you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.