Only two real licensing options

Two distinct types of dealer group are emerging based on new research by CoreData Consulting.

One is driven by satisfying the needs of the adviser while the other is driven first and foremost by the need for a completely compliant process.

Licensees that fall under the first category are typically non-institutionally owned. Compliance is also a key priority but they exist to empower advisers to deliver on their client value proposition.

At the heart of the second model lie formal systems, processes and products. Licensees in this category are commonly aligned to an institution or product manufacturer. Their advisers still receive a lot of support but the model is heavily focused on compliance and product distribution. As a result, advisers can struggle to make it client-centric.

According to a new report by CoreData, which surveyed almost 700 financial advisers Australia-wide, advisers who belong to a non-institutionally owned, adviser and client-centric dealer group are significantly more satisfied and loyal than those who don’t.

They’re more engaged with their licensee and they’re an extremely low flight risk.

While that model is certainly a more expensive proposition for advisers because margins from product sales don’t subsidise licensing fees, the upside is that advisers enjoy greater flexibility, autonomy and access to senior management with a broader approved product and platform menu.

According to Andrew Inwood, principal of CoreData, large aligned licensees had created an environment overwhelmed by structure and process in a bid to manage the enormous regulatory changes affecting the financial services industry.

“One of the ways that large multi-faceted businesses with big distribution engines deal with change is to build a system that caters for the lowest common denominator,” he said.

“Their processes are based on simple repeatable behaviours which allow them to build scale and retain margin.

“However, smaller licensees that are much more focused on recruiting and retaining high quality talent tend to build systems that place a lot more trust and responsibility in advisers’ hands giving them a more flexible working environment.”

There is room for both models and demand for both offerings rise and fall at different times. Advisers should choose the right model for them.

The epitome of the new generation of adviser-focused licensees is Fortnum Financial Advisers, which is the joint winner of the 2015 CoreData Licensee of the Year Award for the second consecutive year.

According to the 2015 CoreData Licensee Report, Fortnum continues to perform well above the industry average, achieving the maximum score of 100 in four out of five key licensee attributes. Over 96 per cent of Fortnum’s advisers achieved profit growth in the last 12 months.

For more information on the 2015 CoreData Licensee Report and Fortnum Financial Advisers, please click here.

*Joel Taylor is national sales manager at Fortnum Financial Advisers. He can be contacted on [email protected]