Keith Cullen (left), Mark Ballantyne and Paul Barrett

The future of the licensee model will involve either direct investment or “quasi-investing” centered around variable licensing fees that compensate licensees for improvements they help create in advice practice performance.

This was the key takeaway on a session focused on the merits of licensees investing in advice practices at the Professional Planner Licensee Summit.

AZ NGA founder Paul Barrett is well-known in the industry for finding financial success by taking an equity stake in advice practices to drive further growth.

“This question about advice profitability blows my mind,” Barrett said at the summit. “These companies make 30 per cent EBIT [earnings before interest and taxes] margins. They are incredibly profitable, they always have been, and they always will be.”

Research from Business Health last year noted the gap between the most successful advice practices and the average, and said revenue for the most successful advice businesses was continuing to grow while others stagnated.

Barrett said people in the licensee world seemed “glum”, which was understandable given the economic condition of licensees, but this was a solvable problem.

“The fact is, the opportunity we all have in front of us is a once-in-a-generation inflection point,” Barrett said.

“This is it. There’s never been a better time in the retail financial planning market than right now. This is the best time.”

Barrett said ultimately licensees have the same challenge as advice practices, which is developing profitable services and delivering them to people who are willing to pay for the value they receive.

“There’s a reason when we designed AZ NGA I actually selected as my business partner an aerospace engineer,” he said, referring to co-founder Paul Brain.