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Adviser talent the most profitable commodity

Mike Taylor24 January 2022
Talent identification

The provision of financial advice is the most valuable and profitable commodity in the financial planning advice chain and the evolving commercial models being deployed by licensees are having to recognise this fact.

An analysis of the commercial models being pursued by licensees has confirmed the centrality of financial advisers in the equation and a desire to ensure that they can attract and retain the best advisers.

The dynamic which has evolved since the substantial exit of the banks from the financial planning space was probably explained best by the founder and chief executive, of AZ Next Generation Advisory, Paul Barrett who said that advice was now being appropriately valued over and above product.

And if there is one thing that Barrett has in common with the chief executive of publicly-listed CountPlus, Matthew Rowe, it is that the identification and retention of financial planning talent is integral to the commercial models they have been building.

In the base of CountPlus and Count Financial it is the pursuit of the so-called “Owner, Diver-Partner” (OD-P) model operating under a licensee framework, while for Barrett’s AZ NGA it is not about building out the license, it is about investing in advice firms in which he believes he has identified “flair and vision”.

Also in the equation is the more cooperative model pursued by groups such as Advice IQ where the member advice firms jointly own and fund the license – something which Advice IQ general manager, Paul Harding-Davis says ensures the firms deeply care about the outcome.

Like Barrett and Rowe, Harding-Davis believes that it is the delivery of financial advice which drives profitability and he argues that in the absence of the subsidies which were once delivered by product manufacturers all licensees will struggle to be profitable.

Someone who understands the dynamics and the economics of running a financial planning licensee really well is ClearView managing director, Simon Swanson, who recently oversaw the transaction resulting in ClearView’s advice business being sold to Centrepoint Alliance with ClearView taking a stake in Centrepoint.

According to Swanson, who now sits on the board of Centrepoint, it is a case of horses for courses in terms of commercial models, but for firms such as ClearView delivering financial advice increasingly became a scale game.

“Without appropriate scale you are going to find yourself in a world of pain,” he said.

For Count’s Matthew Rowe it was a case of having been a managing partner in an accounting firm (Hood Sweeney) and recognising the need to identify and value talent within a business.

He said that if those with the talent were identified and appropriately rewarded there was the risk that they would become resentful and negative.

Rowe said that experience with the OD-P model showed that where those with the talent had a majority stake in their business performance improved.

“It’s because of the alignment,” he said. “That is why you’ve got to back the talent.”

Rowe noted in passing that, interestingly, AMP Limited appeared to have adopted a similar approach of taking minority rather than majority stakes in its aligned financial advice businesses.

He said that there was also plenty of evidence that the salaried adviser model was working for firms but said that it could only properly work if the firm did not become a product manufacturer.

Harding-Davis said that under the model being pursued by Advice IQ a core element of success was the maintenance of regulatory hygiene with all firms having a mutual interest in ensuring the maintenance of standards.

For Rowe, the nature of the contractual arrangements underpinning the OD-P model are such that the governance and regulatory obligations to the license were clearly spelled out with the board having oversight of strategy, financial performance, culture, risk and business compliance while management had responsibility for day to day operations and client relationships.

Mike Taylor

Mike Taylor

Managing Editor/Publisher, Financial Newswire

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