My brief for this column was to share insights on business valuations and merger and acquisition (M&A) opportunities in the accounting and financial advisory space.

However, that’s not the biggest issue concerning advisers right now. For many, their number one concern is which licensee to join.

I’m asked that question daily and it’s hard to respond because there aren’t many top quality options. Probably no more than a handful. The majority of licensees operate unsustainable business models, dependent on payments from product manufacturers and other subsidies. Their way of (not) addressing their imminent financial doom is to squeeze product manufacturers for more sponsorship dollars or try to build in-house products to secure margins.

Advisers should avoid these licensees.

They don’t have the foresight or resources to invest in the only area that really matters; compliance and quality assurance (QA), which increasingly hinges on having the right technology. Rather they thinly spread their limited resources across non-core areas like practice development, product and investment management.

Paul Barrett, AZ NGA

In my experience, related-party products, and slick practice development and business growth programs can be a red flag. They’re often an indication that scarce resources are not being allocated effectively.

Advisers are generally affable people (as I discussed in my last column) so they are naturally attracted to other affable people such as practice development managers representing licensees.

Ancillary programs can sound appealing so it’s hard not to get sucked in but licensees don’t, and can’t, transform businesses. They can’t boost client engagement or solve succession planning issues.

What they’re for

Licensees should provide two incredibly valuable things:

  1. A license to operate; and
  2. Quality assurance.

The licensees who do this the best are the ones worth joining and paying a reasonable fee to. They invest in QA because it is in their DNA.

For most licensees, QA is not in their DNA because this industry hasn’t grown up with the client at the centre of everything it does.

This is in stark contrast to other industries.

In my other role as Chairman of 4 Pines Brewing Company, I can tell you that compliance, or QA as it’s referred to in the food and beverage industry, is taken extremely seriously because the health and safety of consumers is paramount.

Manufacturers spend hundreds of millions of dollars on research and development (R&D) and quality control annually.

Products are continuously trialed and tested to ensure they’re fit for consumption.

Many companies seek to become a Certified B Corporation. This certification indicates a business that meets “the highest standards of verified social and environmental performance, public transparency and legal accountability to balance profit and purpose”.

Stringent quality assurance standards are a badge of honour and a key selling proposition. They are a company’s credentials.

That’s a far cry from the experience in financial advice, which has traditionally seen risk and compliance as a necessary evil.

Mind the apologist

Licensees routinely apologise to advisers for enforcing high standards and jokingly refer to compliance as the “business prevention department”.

This kind of culture can only exist inside organisations that don’t value the end client and see personal advice as a ‘distribution channel’.

Advisers should run from these licensees.

The answer to the question, “which dealer group should I join?” is the one that does the best job of QA.

Licensees must have a robust risk and compliance framework and the resources to continuously invest in quality control because the days of random, periodic file reviews are gone.

ASIC can request client records and information at any time, making it essential for practices to be able to efficiently store, retrieve and analyse client data. Advisers need a licensing partner with the systems and technology to monitor and supervise the provision of quality advice, and deal with any anomalies quickly.

They should partner with a licensee that boldly and unapologetically tells them that their advice will be regularly reviewed and audited, after all quality control is ultimately about protecting your clients.

Look for a licensee with a strong compliance culture and don’t get sucked in by other stuff. It’s just window dressing.

I’ll get back on track writing about M & A activity and trends in the accounting and advisory market next time.

[Barrett is part way through writing a series of columns based on insights he’s gathered as an active acquirer and investor in advice practices. He now owes Professional Planner for letting him mention his beer company. His other columns are here.]

One comment on “Search for quality: What beer can teach us about compliance”
  1. Avatar
    Dugald Braithwaite

    Nice article PB and good insights. Necessity is the mother of invention.

    Several thoughts on this. Over many years of consulting to the advice sector we found management across the advice industry all trying to answer/solve similar issues. The best insights we had to offer were from alternate industry clients, such as logistics and big retail. As you’ve done here with the Food & beverage sector.

    Having spent many years focused on Practice Management with AFSL Licensees I’m well aware of the points you make regarding the operating models, limited resources and role of the “Practice “Managers tasked with building relationships. I penned an article reflecting observations on how the role evolved and the changing face of service delivery to the market. In a longer context it effectively endorses your comments. You can read it here, –

    My final comment is one of great optimism. We’re seeing quite a rapid emergence of tech enabled AFSL’s primarily born out of practices, driven by Financial Planners necessity to evolve, not Licensees trying to squeeze the lemon. These tech solutions address Quality Assurance, Client Focus, plus embed a leap forward in operational efficiencies. To us they represent the new cycle of professional and NextGen advice businesses that will dominate the landscape for the next decade.

    With Quality Assurance at the heart of the advice process Advisers are being freed up again to do what they’re trained for and are passionate about, providing advice.

    On a personal note it’s inspiring to see practitioners taking the lead in the industry and putting the horse before the cart.

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