After a couple of days earlier this week spent chatting with the leaders of some of the best financial planning licensees, it’s clear that licensee businesses generally now fall into two distinct groups: One is still talking about the need to change; the other has simply changed.
One group talks about the changes that need to be made across the industry, as if they were not part of that industry themselves and therefore not responsible for making those changes, and as though they might somehow catch a wave others create and surf it to shore.
The other group doesn’t even talk about the need to change anymore, unless prompted, because business as usual for these licensees (and by extension, for the advisers under their licence) is already different from what it was just a few short years ago.
Characterising the two groups further, though, is a bit more difficult. For example, it’s not true to say all institutionally owned licensees fall into one camp or the other. Nor is it possible to say all independently owned or all institutionally affiliated licensees fall into one or the other. The schism is along philosophical lines, rather than structural or ownership divides.
There are progressive and forward-thinking institutionally owned licensees, just as there are independently owned licensees mired in the thinking and beliefs of a generation passed. A tell-tale sign of which group a licensee falls into is the way its leader prefaces comments. One group’s leaders use words to the effect of, “What we need to start doing is…” The heads of businesses that fall into the other camp start off with, “What we’ve done is…”, or “What we’re doing is…”
Those different worldviews became apparent during the Professional Planner Licensee Summit on Monday and Tuesday this week.
The leaders of 40-odd licensees spent two days locked into discussions over the future role of the licensee entity, the appropriate responses to a rapidly professionalising adviser community, and a number of challenges relating to businesses and structures, among other things. The licensees that attend this annual event – 2017 marked the eighth summit – are generally among the more progressive. They adapt to changing demands and market conditions. It pays to be there – because if you’re not in the room, then you’re the one who gets talked about.
Some of the discussion was informed by new insights CoreData presented about how advisers value their licensees’ offerings. Again, the analysis showed that two groups are emerging: licensees at risk of having many of their advisers leave, and licensees advisers view as desirable places to go.
The new research underpinned the 2017 Licensee of the Year Awards, presented at the Summit by CoreData’s director of Australian financial services, Sean Allen.
The Institutionally Branded Licensee of the Year award went to Commonwealth Financial Planning, surprising some in the room, but not CFPL general manager Hugh Humphrey, who accepted the award. The Institutionally Affiliated Licensee of the Year award went to Matrix Financial Planning, which genuinely did surprise chief executive Todd Kardash. And the Independently Owned Licensee of the Year award went to GPS Wealth – no surprise to anyone who has watched the group’s development in recent years, led by Grahame Evans.
Matrix was named the overall Licensee of the Year.
While there’s merit in running a licensee that meets the needs of advisers, what ultimately matters most is how well advisers meet the needs of their clients.
The licensees that succeed in the future clearly will be those that best respond to the needs of their advisers, but only as those advisers themselves evolve and begin to more knowledgeably and actively embrace the principles and practices of professionals. It was stated more than once at the summit that any licensee whose value proposition extends no further than a licence has no future at all. The licensing and authorisation aspect of the adviser relationship is, in some ways, secondary.
The future is with licensees that understand and embrace advice as a service, support advisers as professionals, and have adjusted to the fact that the nexus between advice and product has already been blown up.
As one participant described it, a licensee is not an annuity business that exists or survives by clipping the ticket based on assets under management. Note the language: a licensee is not an annuity business. Present tense. That means now.
