While the overall numbers of advisers across the industry saw a relative stabilisation over the last year, 2023 marked the first year after a four-year hiatus which saw advisers who were predominantly leaving the larger groups to set up their own AFSLs.
According to figures from Wealth Data, there were more than one hundred of new AFSLs created by advisers in 2023, but only two of them had more than 10 advisers, with the majority of the newly-established licensees being the so-called ‘micro AFSLs’.
Additionally, the proliferation of those small licensees, also referred to as ‘one-man bands’, coincided with the ongoing decline in the overall numbers of advisers which continued throughout 2023 although at much slower pace compared to prior years.
The data showed that in December 2023, there were 15,670 active advisers in Australia as opposed to around 15,800 at the start of the last year.
Adviser Ratings founder Angus Woods tells Professional Planner that the recent uptick in a number of licensees gathered pace in 2023 and is going to be a growing trend which – he expects – will continue throughout 2024.
He also noted that such a growth in AFSL number comes after four years (between 2019 and 2022), during a period where the industry was losing between 50 to 60 net licensees each year, mostly as a result of the “the clean-up of the industry” in the aftermath of the Hayne royal commission.
“We are definitely seeing a pickup in the trend in 2023 and it was the first time, I think, in about five years that we saw an increase in licensees,” Woods says.
“At that time, we still saw a decrease in adviser numbers. So, [advisers] move away not necessarily to the mid-tier dealer groups, they are setting up one those small one-, two-, three-man bands.”
Data provided to Professional Planner last year showed only three licensees with adviser numbers over 500, 13 over 250 and 23 over three figures.
From big to small
The two key reasons which are driving advisers to look to set up their own small licensees is the fact the biggest financial planning groups, such as Insignia and AMP, continued to lose advisers or divest from unprofitable practices along with increased mergers and acquisition activity over the last few months.
According to Wealth Data, between 1 January 2023 and 18 January 2024, Insignia lost a net of 138 advisers (198 lost; 60 appointed), which excludes the sale of Millennium3 to WT Financial Group which covers another 135 advisers.
“Of the 198 we know that some 120 switched and 54 are now at licensees with less than 20 advisers, 29 with mid-tier groups of between 20 and 99 and 37 with groups that have 100 or more advisers,” Wealth Data director Colin Williams says.
As for AMP, their net loss stood at 49 with 72 appointments and 121 departures. Of the 121 losses, 67 advisers have switched and the data further showed that 32 were now in licensees of less than 20 on size, 20 in the mid tiers (licensees with 20 to 99 advisers) and 15 in licensees with 100 or more.
Also, AMP appointed 33 new entrants, while Insignia made an addition of only 15 during the same time.
Choose your own adventure
According to Williams, one of the drivers behind adviser willingness to explore the option to have their own AFSLs was greater flexibility, expected to translate into more opportunities for their clients, and more control for advisers over their own destiny.
Under the umbrella of the larger AFSL, advisers and practices are usually self-employed and enjoy some level of control in terms of how they work but they typically have little to no control over the authorised product listings and they these practices run a process in a format the head of the licensee expects them.
“Now they can correct their own processes and product offering and generally being smaller and more flexible [as opposed to] when you work for the bigger licensee and you want to do something different it can take a long time to get that licensee to make that change,” Williams says.
According to Woods, the easing of compliance as well as more “favourable technology”, particularly for smaller licensees, have made many practices question the value of an overall proposition from the larger dealer groups.
“[But at the same time] a lot of these [larger licenses]… rather than try to wage a battle against the smaller licences are now basically seeing an opportunity,” he says.
Many larger groups see an opportunity in packagingwhat they already do and deliver those services to self licensees, by making them more commercially acceptable for smaller businesses to get their compliance help from the larger organisations.
