Being a good leader when things are going well is one thing, but effective leadership during times of severe dislocation, stress and upset is often another matter entirely. No one knows better than financial advisers themselves how the leaders of Australia’s financial planning licensees have performed in the past 12 months. And those advisers have delivered their verdict through CoreData’s 2021 Licensee Research.

More than 600 advisers, authorised by 75 licensees, provided input into this year’s research. Among many aspects of how their licensees are performing, we asked advisers for their views on how well the leaders of their licensees understood them as advisers and as business owners, how effective those leaders are in making meaningful change, and how reliable they are in terms of delivering on what they say they’re going to do. (You can see the full list of questions below.)

The Licensee Research has traditionally divided licensees into three broad segments: institutionally branded, institutionally affiliated and independently owned. Those segments are becoming less relevant as fewer and fewer institutionally branded licensees continue to exist. In 2021 we’ve retained those segments for the sake of continuity, but we’ve introduced a new segmentation approach, based on the size of a licensee’s parent entity, and the chart below ranks advisers’ views of the leadership of licensees, segmented by size. We divide the licensee market into five tiers:

  • Top tier: Licensee parent entities with more than 500 advisers
  • Large: Licensee parent entities with between 100 and 499 advisers
  • Medium: Licensee parent entities with 10 to 99 advisers
  • Small: Licensee parent entities with two to 9 advisers
  • Single: Licensees with just one authorised representative.

Licensees ping-pong between tiers on occasion as adviser numbers rise and fall. But when the tiers were first defined about six months ago the numbers were reasonably evenly spread (5900 in the Top Tier, 5600 in the Large Tier, 5200 in the Medium Tier, and 4600 in the Small + Single tiers). Since then, the total number of advisers in the industry has declined, so when we analyse the tiers we tend to focus on the percentage of total advisers accounted for by each tier (see chart) rather than absolute adviser numbers.

The fact that the numbers have moved so much even over such a short period of time clearly illustrates one of the key structural shifts underway in the advice industry.

The tiered approach to analysing licensees means that AMP Financial Planning no longer sits in a segment (institutionally branded) more or less by itself. All of the licensees in the AMP group (AMPFP, Hillross, Charter, ipac, Portfolio Planning Solutions) sit in the Top Tier of licensees, because AMP as the parent entity has more than 500 advisers across all of its licenses. The same goes for all licensees in the IOOF group (RI Advice, Millennium3, Consultum, Lonsdale, Bridges, Shadforth and so on), and other non-institutionally-owned licensees, such as Synchron.

The logic behind this move is simple. Not only are institutionally branded licensees declining in number, but their influence, as measured by number of advisers, is declining. And the back-office processes and technologies of a licensee parent entity are being shared across individual licensees within the same group. What differentiates one licensee from another licensee is, increasingly, branding, marketing, target market, advice offer, culture and leadership.

Which brings us back to where we started, and the issue of how advisers rate the leadership of the licensees that notionally support them as professionals and business owners.

These are preliminary results from the 2021 Licensee Research. While they give us a good sense of a trend, the final numbers will move around slightly as the final few responses come in. The first thing to note is that despite segmenting licensees by tiers in 2021, rather than by ownership structure, there remains a clear divide within the industry – in this analysis, between the top-tier of licensees and the Large and Medium tiers.

Key:

  1. Understanding of you and your business
  2. Empathy towards you and your business
  3. Ability to identify and implement changes at a licensee level that improve my business’s performance
  4. Ability to identify and implement changes at a licensee level that improve the efficiency of my advice delivery
  5. Ability to identify and implement changes at a licensee level that reduce my compliance burden without reducing compliance effectiveness
  6. Being genuine and honest – they are what they say they are and will not misrepresent anything
  7. Acting in my interest – there is a fair mutual benefit to the relationship, and they won’t exploit you
  8. Having the requisite capabilities and expertise to deliver what you need
  9. They get the job done on time every time and meet your expectations
  10. How well you know them (and how well they know you), how relatable they are
  11. How well-suited they are to their role
  12. Representing you, your business and your profession to regulators, media and other parties

The questions around leadership touch on issues of intimacy, authenticity and integrity, benevolence, competence and consistency. In other words, they cover the elements that typically and fairly uncontroversially are widely understood to constitute the broader issue of trust. And they indicate how deeply the leaders of licensee businesses are trusted by the advisers within their networks.

During a prolonged period of tumult and turmoil, trust in the leader of an organisation is a critical potential indicator of how long those they lead will continue to be led. Low scores on any or all of these measures could indicate a lack of trust on the part of the respondent – and indeed, advisers in Top Tier licensees tell us they’re more likely than advisers in Large and Medium tier licensees to consider switching to a new licensee in the coming 12 months.

It’s been a difficult period for the financial advice industry, dating back to at least the commencement of the Royal Commission into Misconduct in Banking, Superannuation and Financial Services. Quality leadership has come to the forefront. Difficult decisions have been made that have affected some for the potential benefit of the many, and it’s sometimes easy to think of difficult and unpopular decisions as also being poor decisions – especially if you’re on the wrong end of one of them.

But it’s leadership that will get financial advice through its current period of change and over the hurdles it faces in the next several years. The decisions that are made today, the leadership that’s demonstrated right now during this critical period of the industry’s development, will determine whether its foundations will support a future profession, or whether the whole thing is built on sand.

Simon Hoyle is head of market insight for CoreData Research.
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