Staying, going or changing your licensing arrangements?

We’ve fielded an increasing number of enquiries over the past few months from Australian advisers considering their current licensing arrangements. Are they receiving meaningful value from their existing relationship? Is their reputation being enhanced (or perhaps damaged) by association? Does their licensee offer a clear way forward for the future or, is a change warranted? And if it is, to whom? Perhaps obtaining their own license is a viable option.

While we’re definitely not suggesting ‘change for change sake’, we do believe very strongly it is prudent business practice to review existing professional arrangements regularly and to satisfy yourself that you are receiving good value and are well-placed for the future (in much the same as clients should be encouraged to do so with their own adviser). A great question to ask yourself is: if I didn’t have to be licensed, would I still be happy to pay what I’m now paying my licensee for the services I’m currently receiving? If you’re not convinced, perhaps it’s time to look elsewhere?

And while this can be viewed simply as a part of normal market activity, what is of particular interest to me (leaving aside for the moment the option of ‘own license’ – a subject for another day) is… HOW does an adviser evaluate a licensee? Without a realistic and objective assessment, the grass on the other side of the fence will always look greener.

It’s a fact that nobody sets out to write an ordinary CV for a job, describe a house for sale in lack-lustre terms or suggest that a wine from that unknown little vineyard is anything other than outstanding. The same goes, in my opinion, for evaluating value propositions. Most read very well (not much point in having one that doesn’t after all!), but you will need to dig a little – to look past the words, to separate fact from fiction!

The following table contains some of the most commonly described licensee features and how you might be able to substantiate their veracity;


The statement

The proof

“Our fee structure is very competitive.”

It’s easy to do the ‘numbers’ but make sure you compare apples with apples. Are there additional costs for say PI or software for example?

“We have a clear vision and direction.”

Ask to see the licensee’s current business and strategic plan. What are their goals and objectives for the next 12 months; how about 36 months?

“We are a ‘leading’ licensee.”

How is ‘leading’ determined? Has the licensee been formally recognised by any external, third party?

“We are on the same page as our advisers.”

In what way? Do they regularly survey their advisers for example (and what actions have been taken as a result)? What is the level of adviser involvement in the ‘nuts & bolts’ of the group – do they contribute through committees and/or panels?

“We have an experienced practice management team in place.”

What are their credentials? Has the profitability of their practices been improved as a result of the team? What are their key measures for success? How are the BDM/PDMs recognised and rewarded?

“We partner with our advisers to help them grow their businesses.”

What’s been the average growth rate of practices over the last few years? How about their history of profitability? Is there a tangible development program/support in place? Are any services outsourced to ‘best in class’ third party providers?

“We offer a fast and efficient support service.”

Are there clearly stipulated service standards in place? Are they being met?

“We are open and transparent in everything we do.”

Is the representative’s agreement crystal clear in those areas that mean the most to you (‘ownership’ of the clients, ability to sell/acquire businesses and certainty of ongoing fee structure/levels for example)?

Are the key performance indicators for their managers (including how they are remunerated) fully aligned to your key goals?

“Our advisers are extremely happy and satisfied.”

When was the last adviser survey conducted? What were the results? How do they compare to the broader market? Have you spoken directly with an adviser within the group? How about one who has recently left?

“Our practices are successful, professionally managed and profitable.”

Does the licensee require compulsory membership to an industry association? What percentage of advisers are CFP (or equivalent) qualified? What is the average practice profitability? What are the results of the latest external benchmarking exercise? Who conducted it?

“It’s easy to join/leave us.”

What does the Agreement say? Is there a transition team in place to assist? Have you spoken to someone who has recently joined/left?


For Your Consideration.

Terry Bell.

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