Some self-licensed advisers are choosing to give up their AFSL in favour of joining a large dealer group as a form of de-risking amid growing compliance and operational complexity.<\/b>\u00a0<\/p>\n
According to Forte Asset Management founder and director Steve Prendeville,\u00a0a significant portion\u00a0of current advice practice transactions involve advisers who want to remain client-facing but no longer wish to carry the responsibilities that come with business ownership.\u00a0<\/p>\n
The trend highlights how succession planning in advice is increasingly being driven by lifestyle and operational considerations rather than retirement alone, particularly as firms grapple with ongoing compliance obligations, technology investment\u00a0requirements\u00a0and rising business management demands.\u00a0<\/p>\n
Prendeville said many advisers are now reassessing whether owning an AFSL\u00a0remained\u00a0the right fit for their personal and professional goals.\u00a0<\/p>\n
\u201cProbably around 30-40 per cent of my sales are actually advisers who love advising but have realised that they just don\u2019t have the energy for all the compliance elements to it, the HR, IT, all of those that come with being a business owner,\u201d\u00a0Prendeville\u00a0told Money Management.\u00a0<\/p>\n
\u201cSo,\u00a0they\u2019re\u00a0selling the business,\u00a0they\u2019re\u00a0de-risking, but\u00a0they\u2019re\u00a0selling to groups that they\u00a0actually want\u00a0to stay and work in,\u00a0purely as an adviser.\u00a0They\u2019re\u00a0simplifying their lives because it is a trying environment.\u00a0<\/p>\n
\u201cYou\u2019ve got to be constantly looking forward, you\u2019ve got to be really constant and looking at all of the trends, the technology risk factors, and so many are coming back from being business owners to employees, but they\u2019ve de-risked.\u201d\u00a0<\/p>\n
The comments suggest consolidation across the advice profession is not solely being driven by acquirers seeking scale, but also by advisers actively\u00a0seeking\u00a0to remove operational risk from their working lives.\u00a0<\/p>\n
Over recent years, the profession has been forced to navigate the removal of grandfathered commissions, the transition to fee-for-service models, increased regulatory scrutiny and continuing technology investment requirements.\u00a0<\/p>\n
Prendeville said that environment had elevated the importance of business management skills, rather than simply being a good adviser.\u00a0<\/p>\n
\u201cIt does need to be a focus on business management rather than being the best adviser. You need to be the best business owner and grow that business and be focused on that, which is a different mindset.\u00a0<\/p>\n
\u201cYes, they overlap because every decision is made also for the benefit client, but it is different skill sets, it is different lens that you need to look at making a decision through.\u201d\u00a0<\/p>\n
The distinction between being a successful adviser and being a successful business owner has become an increasingly common theme across the profession.\u00a0<\/p>\n
Rebalancing period<\/b>\u00a0<\/p>\n
Prendeville said the surge in advisers seeking exits over recent years appears\u00a0to be easing, with transaction activity returning to more normal levels.\u00a0<\/p>\n
\u201cThe latest stats that\u00a0I\u2019ve\u00a0seen is that last year somewhere around 24 per cent was seeking to sell. This year\u00a0it\u2019s\u00a010 per cent\u00a0which, over the last 23 years, has been about market average.\u00a0<\/p>\n
\u201cIt\u00a0accelerated over the last two, three years, mainly because everyone had to go re-engineer their businesses. With the loss of grandfathering revenue and all the legislative changes, moving to fixed\u00a0fees, moving to new gen platforms.\u00a0<\/p>\n
\u201cThere\u2019s been a constant change \u2013 either enforced or proactively sought \u2013 and so people will have deferred retirement, but I think that that lump of has gone through now, and I think we\u2019re back to normal market conditions.\u201d\u00a0<\/p>\n
One of the consequences of the\u00a0royal\u00a0commission\u00a0in 2019 has been the fragmentation of the advice business landscape with\u00a0new, large dealer groups\u00a0emerging\u00a0alongside a strong trend of micro AFSLs. Recent years have, however, seen a consolidation in the market as mid and large-size licensees absorb smaller businesses.\u00a0<\/p>\n
Not only does it allow those licensees to grow despite a stagnated talent pool, small and micro firms then\u00a0benefit\u00a0from compliance and operational cost savings only available to scalable businesses.\u00a0<\/p>\n
\u201cSmall businesses \u2013 the sub $500k revenue \u2013 really need a dealer group for cost efficiency, for education, but also business planning\u00a0assistance\u00a0as well, so I think that the large to medium licensee provides a substantial amount of services for small businesses.\u00a0<\/p>\n
\u201cThey\u2019ve got the infrastructure that you can leverage from their size, yeah, so discounts on PI, and potentially technology, education, that type of thing.\u201d\u00a0<\/p>\n
He added that advisers should not automatically view larger groups negatively when assessing their future options.\u00a0<\/p>\n
\u201cI think that the big\u00a0doesn\u2019t\u00a0mean bad by any means. It could be the best choice to be with a larger group, depending upon your business needs.\u201d\u00a0<\/p>\n
However, Prendeville also pointed to the growing influence of investment platforms and trustees, which he said was creating additional pressure on advice businesses and reinforcing the value of dealer group support structures.\u00a0<\/p>\n
\u201cWe\u2019ve also seen the actions by and growing influence of trustees and platforms \u2013 liability or responsibility\u00a0that\u2019s\u00a0being acted on there.\u00a0<\/p>\n
\u201cPlatforms now have substantially greater influence, particularly, they can close you off, there\u2019s those that are seeking, let us understand the SOA, the advice component, and so I believe that\u2019s the duty of the dealer group, rather.\u201d\u00a0<\/p>\n
The recent high-profile Shield and First Guardian\u00a0collapses have shone a light on some of the risks that come with being\u00a0part of a large licensee.\u00a0\u00a0<\/p>\n
Sequoia Group\u2019s InterPrac licensee is a perfect case of this with\u00a0several platforms blacklisting new business<\/a>\u00a0from any adviser\u00a0operating\u00a0under InterPrac\u2019s license at the end\u00a0of last year as pressure turned up for the embattled firm\u00a0after it\u00a0was served a lawsuit by ASIC<\/a>.\u00a0<\/p>\n