Wayne Gretzky, the former professional Canadian ice hockey player often referred to as hockey’s GOAT (greatest of all time), famously attributed his success to his ability to “Skate to where the puck is going to be, not where it has been”.
While Gretzky’s 1982 quote has become an overused corporate cliché, it is still relevant today, particularly in the context of professional financial advice.
Advice businesses, including licensees, need to look to the future and ask, where to next?
After decades of regulatory and structural change, the advice profession is budding.
It will bloom in the next three to five years.
From a cottage industry with many sole practitioners operating from their lounge rooms and garages, modern advisory firms are well structured, well run operations.
Many offer a broad range of services.
And they’re getting larger.
For example, in 2016, the average business inside Fortnum had 1.2 advisers and $750,000 in annual revenue. Today, it’s 2.5 advisers and over $1.2 million in revenue.
Our larger businesses have 15+ advisers and revenues approaching $10 million.
The changing face and nature of advice businesses have significant implications for service providers to the sector including product manufacturers, technology companies and licensees.
They will need to change too in order to remain relevant.
For licensees who are used to dealing with small, relatively unsophisticated practices, they’ll need to understand the vastly different requirements and challenges of larger, sophisticated businesses.
At the top end these businesses will look like the mid-tier in accounting and professional services.
The licensing solution, operating framework and management style that has served for the past 50 years won’t survive the next five.
Consider the reversal of the value chain in just three short years.
Historically, product flowed through the licensee to the adviser to the client. Many licensees used their network to increase the scale and profitability of an institutional parent or partner.
Today, the client is firmly in the driver’s seat. Advice is based on their needs, goals and priorities, which may or may not involve product.
Licensees skating to where the puck is going will build scale for the benefit of advisers and clients.
Scale will enable them to drive down costs, support the delivery of affordable advice, and invest in research and development.
This is a significant paradigm shift.
Enabling quality advice
The perception of licensees as a necessary evil; a mere ticket to the game is fading.
It originally came about because the existence and core functions of a licensee; the authorisation, supervision and monitoring of advisers, was and is rooted in regulation.
Unfortunately, many licensees enabled poor practices.
In the same way, psychologists use the term enabler to describe a person who aides someone’s addiction, licensees enabled product manufacturers to peddle average products.
However, licensees skating to where the puck is going will only enable the efficient, profitable and sustainable delivery of good advice.
While the authorisation, supervision and monitoring of advisers are still core tenets of the licensing function, those activities are just the baseline for the future state.
As a utility, licensees need to supply the essential tools and resources to drive operational efficiency and business growth including scale, management consulting, and investment and technology solutions.
Above all, they need an industrial strength governance framework.
Skating to where the puck is going will require licensees to have the insight and peripheral vision to anticipate the services that make sense for large, professional advice businesses.
To perform their function effectively, they will need to be flexible, responsive and innovative.
In doing all of this, they must be careful not to lose the comradery and intimacy that has been part of the industry’s fabric since inception.