The growing trend of practices moving into the privately owned licensee sector is continuing, with 71.7% of advisers now licensed by privately-owned licensees, according to Adviser Ratings Adviser Musical Chairs Report for Q3, 2024.
The research firm says the profession is shifting towards independent, smaller practices “…that are looking for licensees who will support a client-centric approach to advice delivery and regulatory adaptation.”
It adds that licensees not supporting or being seen to conflict with this growing focus on professionalism are seeing advisers looking for new support “…however, over time, it’s possible to see smaller licensees also grouping together, given the economies of scale grow with more advisers under a license.”
The report includes a special feature entitled The great migration: The reshaping of the professional landscape where Adviser Ratings says that the last two and a half years reveals a “…compelling narrative of financial advisers moving towards models that offer greater autonomy, flexibility, alignment with evolving client needs, and support for their growing professionalism.”
Pointing towards The rise of the independents: A new era dawns, the firm says the most striking trend that emerges from its data over the last two and a half years is the overwhelming surge towards privately owned licensees. “This isn’t just a minor shift; it’s a significant movement.”
The report says new entrants to the industry are overwhelmingly choosing privately owned firms “…with 311 joining those with 1-10 advisers and 281 opting for firms with 11-100 advisers. Further, the mass exodus of traditional institutional licensees, with banks and diversified firms losing talent to these more nimble, autonomous entities, underscores the industry’s shift towards autonomy and flexibility.”
…This isn’t merely a reshuffling of the deck; it’s a fundamental redefinition of what it means to be a financial adviser in 2024 and beyond…
It adds that close to double the number of advisers transitioned to small (1-10) and medium (11-100) privately owned licensees as moved to large privately owned licensees (100+ representatives) as part of product divestment in advice.
“This isn’t merely a reshuffling of the deck; it’s a fundamental redefinition of what it means to be a financial adviser in 2024 and beyond.”
The dynamics of private practice: A fluid ecosystem
The firm is observing “…fascinating internal dynamics in the burgeoning world of privately owned licensees. Significant movement between size categories suggests a vibrant, competitive ecosystem where advisers constantly seek the optimal environment for their practice.”
For instance, 311 advisers moved from very small licensees (1-10 representatives) to mid-sized ones (11-100), while 275 leapt to large licensees (100+). Conversely, the firm saw 266 advisers downsizing from large privately owned licensees to small ones.
“This fluidity speaks to a sector that’s alive with opportunity, where advisers can scale up or down based on their vision, client base, and business model.”
Adviser Ratings says these changes are before considering the potential introduction of a new class of adviser within financial products.
“As we navigate this transformative period, one thing is clear: today’s financial planning profession looks very different from yesterday’s financial planning industry. Those who can adapt to this new landscape – embracing autonomy, leveraging technology, and putting client needs at the forefront – will be best positioned to thrive in this brave new world of financial advice,” it says.
