Growth of Boutique Licensee Sector


Boutique firms are the only sector in the licensee space to have experienced any growth in recent years, according to Adviser Ratings.

In its latest ‘Musical Chairs’ quarterly release, the firm reports that since 2017, the small, private licensee sector with 1-to-10 advisers is the only segment to have grown amid the continuing “mass exodus” of advisers.

There are now over 700 more advisers licensed in this space than there were five years ago.

In discussing where some advisers who’ve stayed in the industry were ending up, it says formerly bank-licensed advisers have now primarily fractured off to privately-owned licensees, with a particular preference for boutiques.

The research firm adds that advisers tell it they don’t miss being tied to limited product lists and that the main teething problems listed have been around access to some of the traditional technology and support services that big licensees could provide at low cost.

It notes too that despite the advice industry shrinking by a third of its size since 2019, “…our analysis suggests it has further to fall before it plateaus. In fact, we expect numbers to fall below the 15,000 mark in the next two to three years.”

“Leaving education standards to one side, advisers tell us they are grappling with continual profitability and cost pressure, as well as Covid uncertainty and limited time to meet compliance obligations.”

…one in six advisers who have departed the industry had passed the exam…

The research also shows one in six advisers who have departed the industry had passed the financial adviser exam, “…which indicates a commitment to professional benchmarks is not always indicative of a long-term desire to stick around.”

Number of Departures

Adviser Ratings notes too that the first quarter of the year also saw the quietest quarter for exits in more than three years. There were 433 departures (a 1.07% decline) compared with more than 1,800 in the final quarter of 2021.

“Last year’s surge in exits can be explained by the exam deadline, which drew a line in the sand for advisers who were undecided about whether to stay in the industry. With that deadline passed, there were fewer outflows this quarter, but we don’t see a three-month trend as a sign of stabilisation … we still expect thousands more advisers to exit in the next few years,” the report says.

Courtesy of Adviser Ratings.