Licensee heads show little concern about advisers leaving to go the self-licensing route, if it’s for the right reasons and not to cut costs, the Professional Planner Licensee Summit heard.
Keith Cullen, chief executive of WT Financial Group which acquired Sentry Advice, Synchron, and Millenium3, said he could empathise with the decision by advisers to go down the self-licensing route.
“If I’d been running a practice licensed under any of the acquisitions we’ve made, I’d have gone and got my own license too,” Cullen said.
“A lot of licensees make their practices’ life hell and do nothing to facilitate their growth and enable them running efficient businesses in a collegiate way. How do you stop people going down the self-licensed path?”
Cullen said a licensee is only as good as the value as it adds, which should be the lead commercial focus.
“I understand why people would go down the path to get out from underneath restrictive licensee models,” Cullen said.
“Those that go down the path to save money? You can’t run a self-licensed business for anything like you can [for] the cost you can run it under an efficient and supportive AFSL.”
Fitzpatricks Private Wealth CEO Jasia Fabig said the firm hasn’t lost any advisers to self-licensing.
“We’ve lost businesses to other licensees that are delivering licensee services cheaper than we can,” Fabig said.
“What we’re building is a business that’s united by a brand that has a shared vision, common goals and importantly has a tight-knit community. Advisers that stay with us buy [into] community.”
Fabig said advisers running their own AFSL are driven by their own set of motivators and it’s important to have different models in the ecosystem.
“As an industry we’ve got to stop thinking with a sort of scarcity mindset, there’s different models that suit different businesses,” Fabig said.
“There’s enough of us here that want to collaborate and work together. I don’t see us competing for advisers, we all offer something slightly different. Advice practices need to choose based on what their own individual motivations are.”
Commenting on the panelists’ views of self-licensing, one self-licensed adviser who led a seven-adviser firm said the decision was about control and risk management, not cutting costs.
Having started their firm in 2009, pre-FOFA, they said they were “very happy to be there” in 2018 during the Hayne royal commission, but could also see the advantages of the development of some of the newer licensee models.
“The partnership model that’s been discussed is very interesting,” the adviser said.
“It’s expensive [self-licensing], we’re definitely not saving money doing it that way, but the reasons for self-licensed are still there.”
Shape of advice
Rhombus Advisory chief advice officer Darren Whereat said practices and advisers had left his network to become self-licensed “more than he would like” over the last five years when the Rhombus licensees were still majority owned by Insignia Financial.
But he said that since the Rhombus divestment from Insignia was announced almost a year ago, which will kick in officially at the start of the upcoming financial year, departures for self-licensing have cooled off.
“For us, choice is important for a licensee whether you’re a micro, mid-tier or institutional,” Whereat said.
“What it is for me is the value in the sharing of ideas, and has to be genuine partnership. You can throw that word out pretty clearly but we’ve made a cinscious decision to set up our structure that actually truly shares the spoils either through equity ownership, seats on the board.”
Whereat said the new model takes the “best of both models” by offering a higher level of control that self-licensed firms have along with a community feel and institutional backing.
“For us, it’s about creating a middle ground that took the best of the institutional model because there are benefits to the institutional model and the self-licensed and we’ve come up with a good middle ground,” Whereat said.
“The 220 businesses there that represent 480 advisers are telling us it’s a good model, they’re all on this journey. It’s about now making sure that value exchange continues to be delivered.”
Describing the Rhombus name, Whereat said a rhombus is a four-sided shape that, irrespective of which side and how the shape is stretched, the sides always stay the same.
“For us, that’s about clients, advisers, shareholders and staff,” Whereat said. “The symbolism for us is about true partnership.”
And irrespective of the shape, Whereat said lines joining the opposite vertices of a rhombus always intersect in the dead center.
“For us that is client’s Best Interests Duty… there is plenty behind the symbolism in terms of what we’re doing,” Whereat said.
“We think the licensee model could be run more efficiently, more sustainability, with greater partnership and alignment,” Whereat said.
Insignia will remain a minority owner and Whereat said the wealth giant has been supportive during the transition.
“Insignia has been a big supporter of advice over the years, a lone voice when advice didn’t have a voice,” Whereat said.
“They’re allowing us to do this, they will be a cornerstone and significant shareholder, they will also have a seat on the board.”
Winner takes all
In a live poll, the Licensee Summit audience was asked which licensing model would be most successful over the next 10 years.
Almost two-thirds (65 per cent) of the audience picked professional services partnership, 13 per cent said self-licensed boutique, 9 per cent each said traditional dealer group or super fund/insurer/bank advice, and 4 per cent said adviser-owned co-op.
Cullen said he agreed that partnerships would likely be the most successful.
“That’s the fun stuff, right?” he said.
“Partnering with the practices is what we got into this game to do and that is what our absolute focus.”
Sandhya Maini, head of Zurich Assure, said that assuming the Quality of Advice Review reforms go ahead and the institutions can take on “qualified advisers”, this would allow banks, super funds and insurers to play a bigger part in the future of the greater advice ecosystem.
“At scale, nurturing talent at the volume we need – I understand the 9 per cent [from the poll that selected super funds/insurers/banks] that sits there right now – but the top models can bring in the volume we need to fix the adviser numbers,” Maini said.
