In early June, the authorised representatives of Dover Financial Advisers were given less than a month to find a new Australian Financial Services licensee (AFSL). Switching to a new licensee is a time-consuming and complex procedure at the best of times but having to do it with no warning and for reasons not of the advisers’ choosing elevates the task into the realm of the near-impossible.
Just selecting a new licensee, even before the transition process starts, can be a protracted process. It’s to be hoped Dover advisers aren’t forced onto accepting the first (or the only) offer that comes along. The fit between adviser and licensee needs to be precise. Not all advisers are suited to being authorised by all licensees, and not all licensees are suitable for all advisers.
Futuro Financial Services managing director Paul Kelly says the licensee has received about 60 approaches “from various parties” in the wake of the Dover collapse. Kelly says advisers must understand that choosing a new licensee cannot be a one-dimensional decision.
“It’s not just going to be about the service offering, it is going to be around some of the cultural aspects,” he says. “I think a lot of that is lost at the moment.
“I feel for these people. They’ve got a short time period to try to find the home that suits them best – how many licensees are they going to pick up the phone to? Five? Six?
“If you’re doing it in a purposeful and respectful fashion, you’re going to want to talk to these people for 20 minutes or half an hour each. That’s a fair chunk of your day gone, just chatting on the phone. And it’s the same for them – if they’re not spending half an hour on the phone initially, just working through the things they want to find out about, that might say something as well.”
Kelly says any adviser looking for a new licensee must prepare really well, as must a licensee before taking them on.
“The best ones we’ve seen when we’re talking to them are the ones that have come with a set of questions,” he says.
One way for an adviser to find out more about how other licensees work and how well the licensee supports and engages with its advice network might be to simply to ask other advisers what they think of their licensees.
CoreData research shows that since 2016 the gap across institutionally branded, institutionally affiliated and independently owned licensees has narrowed considerably, when it comes to the proportion of advisers who are prepared to recommend their own licensee to another adviser. See chart below.
In 2016, the proportion of authorised representatives who said they’d recommend their licensee to other advisers stood at 46.5 per cent for institutionally branded licensees, 61.7 per cent for institutionally affiliated licensees, and about 81.2 per cent for independently owned licensees.
By 2018, the proportions had shifted to 60.4 per cent, 65.1 per cent and 70.3 per cent, respectively. The gap from highest to lowest had fallen from more than 34 percentage points to less than 10 percentage points. Overall, advisers’propensity to recommend their own licensee has trended upwards over the three years.
If you were to simply conflate these various findings and views of the market – adviser satisfaction measured by licensee ownership, size and licensee growth – you might conclude that the sweet spot for an adviser right now is to be authorised by a large to very large independently owned licensee, but one that’s not growing too quickly.
While advisers might choose dealer groups based on a recommendation, it’s worth noting that a good licensee isn’t necessarily the fastest-growing one, although there is some correlation between size and quality.
Commonwealth Financial Planning (CFPL) lifted adviser numbers by 11.7 per cent and Matrix Planning Solutions went up by 11.2 per cent between 2013 and 2018 when the number of individuals authorised to give personal financial advice increased by about 34 per cent, from just more than 19,000 to about 25,500.
Whatever yardsticks CFPL and Matrix use to measure success, growth in adviser numbers appears not to be one of them. Each has achieved growth
well below the overall market, but as their Licensee of the Year (LotY) status demonstrates, their advisers clearly value very highly the quality of management and level of support the licensees provide. (GPS Wealth is in a different stage of its development, having been established only in 2012. It grew from just 19 advisers in 2013 to 293 advisers in 2018.)
The movement of authorised representatives between licensees is constantly reshaping the market. So-called mega licensees have lost about 6.9 per cent market share over the period from 2013 to 2018, while micro and medium-sized licensees have gained ground, relatively speaking, providing a different lens on adviser preferences regarding licensee-size.
The finalists in the LotY awards over the last three years – those licensees whose own advisers say they are doing the best job – are generally clustered in the very large and large bands.
But even this shows how fraught the task can be when it comes to selecting a new licensee. With about 400 authorised representatives, the large, independently owned space is precisely the territory that Dover occupied. And Dover was a finalist in the 2016 LotY awards, reflecting high satisfaction among its advisers at the time. How things change.