Vincent Holland (left), Jaime Johns and Recep Peker

Self-licensing has opened the door for advice practices to take complete control over their operations, but that responsibility requires careful due diligence into tech vendors.

Because of the long-term implications, Plutosoft co-founder Vincent Holland said it was invaluable to ask hard questions over what security certifications the product provider holds and what their track record is in the Australian market.

“The key is to do thorough due diligence and know what you’re getting into,” Holland tells Professional Planner.

“Technology is a key part of running your business. Make sure it’s well planned and look at different solutions. We would always recommend running a trial of a system, because at the end of the day it’s a big decision.”

Holland says more licensees are moving into open software approved product lists rather than mandating pieces of software to “hook into”.

“It’s just broadly a recognition that advisers across the board have more choice than they’ve ever had – that’s products, licensing or self-licensing, software,” Holland says.

“There’s a lot more choice in the market now than there’s ever been, because the big banks left the sector.”

However, Holland adds that software is one of the key factors in deciding whether to change from being with a licensee or going self-licensed because it becomes a dominant influence on everything from profitability to client experience.

“The [issue] for a self-licenced adviser is they’re now moving to their own structures and so they’re removed from the dealer group structure they once would have had,” Holland says.

Keeping the slate clean

SuitabilityHub founder and managing director Recep Peker says moving to self-licensing is “one of the most transformational moments” in an adviser’s career.

“They essentially have a clean slate and they can build the technology stack they believe is best in class for their client value proposition,” Peker says.

“Before considering their tech stacks, advisers should really consider their value proposition to clients. We see too many advisers trying to be all things to all people.”

Peker says the due diligence process is different depending on which tech sector is being assessed.

“For example, with investment platforms, they’re both technology and financial products,” Peker says.

“However, the adviser due diligence process around platforms has been heavily centred around fees, because full platform due diligence has been out of reach for many.”

Avanzare Group managing director Jaime Johns is currently working with the leaders of firms who are designing their own tech stack while also being in the process of getting an Australian financial services licence.

“They’re having the opportunity now to actually consider [whether] they want to stay in the same technology that they had when they were part of a licensee group,” Johns says.

Johns says it’s a mind-opening experience for businesses like this to avoid past frustrations outside of their control.

“They’re starting to explore what else is out there, but the thing that I’m finding is they’re probably not putting enough structure around how they actually do that due diligence in order to accurately measure and scope what it is they need,” Johns says.

Hopping in the driver’s seat

Johns says it’s important to road test any tech option before finalising a deal with a vendor.

“We’ve all had demos and we’ve been told in a meeting that [the tech] can do something [it turns out it can’t deliver],” Johns said, adding it’s worth getting someone who is a subject matter expert to help identify strengths and weaknesses of the service.

“Get someone who understands the tech layer so they can help you scope what it is you should be looking at. Ensure you have support people as part of that due diligence and as part of those demos because they’re the engine room of your business.”

Holland says firms that go down the self-licensed pathway would be better off finding tech that’s easy to configure rather than relying on a complex setup.

“If you are a making a licensing change, whether that’s to another dealer group or getting your own licence, you want to make sure you have your systems lined up before the changes are made,” Holland says.

“You want [the transition] done so when you’re ready to start you’ve got your systems lined up.”

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