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Start Making Sense Ep 7: The rise of licensee fees

CoreData has just completed its 2020 Licensee Research and it’s thrown up some interesting insights into how financial advisers view their licensees and the services they provide.

Overall, advisers’ satisfaction with their licensees is higher this year than it was last year, but it’s still not back to the levels it was when we did this research in 2018.

We look at a range of elements of the licensee offer and we also look at a number of individual components of each of those elements.

At a top level, advisers’ satisfaction with their licensees’ service is higher for all elements except one – adviser technology.

When we look at the components of this element more deeply we find that advisers’ satisfaction is slightly lower this year than it was last year. And this is the only major service element where that’s the case.

Otherwise, it seems that after a drop-off in 2019, licensees have generally lifted their game, and advisers are responding positively.

But why does adviser satisfaction even matter?

Well, in a world where licensee fees were declining, or were still being subsidised by products, or other sources, it might be less of a big deal.

But subsidies are being removed from the system, licensees are having to cover the costs of servicing advisers, and so generally, licensee fees are on the rise.

Across the industry, two-thirds of advisers say they are paying more to their licensee this year than they were last year.

The average fee in 2020 is almost $38,600 per Authorised Representative.

But there’s a wide range. The highest figure in this year’s research is $85,000, but some advisers are still paying $20,000 a year, or less.

Where fees are rising, licensees are under increasing pressure to prove their worth to advisers, and advisers are understandably starting to question the value they get.

Where a fee isn’t reflective of the cost to serve, advisers might start questioning the long-term viability of their licensee or start to wonder where the fee is being subsidised from.

CoreData’s Licensee Research gives licensees the insights they need to assess what their advisers think about how their offer and how it stacks up compared to what other advisers, in other licensees, think about theirs.

By doing this research and working with licensees who want to improve their service, we aim to help improve the quality – and the pricing – of services to all advisers.

If you would like to know more about the work CoreData is doing with licensees and financial advice firms, please give us a call.

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  1.' Paul Stephan says:

    Interesting numbers. Be helpful to know what an adviser paying $20,000 or $40,000 pa receives in terms of ancillary benefits like software licensing etc.

    The fact that adviser numbers are declining will place Licensees under more pressure to spread fixed costs over fewer advisers. I expect to see some consolidation in this space short term.

    Being lured by lower fees is fraught with danger if the Licensee you move to is unsustainable or looking to exit. I wouldn’t expect them to tell you or even know what their owners intend.

    For many advisers (certainly myself), the greatest distraction at present is distraction from what we need to be focused on. ie education, new business, evolving business models etc.

    Best wishes to everyone in Licensee and Adviser world that’s doing it tough…hang in there 🙂

  2.' Jeremy Wright says:

    The issue of increasing Licensee fees and declining adviser numbers, is not dissimilar to the decreasing Life Insurance New Business and increasing Insurance premiums to offset the New Business decline.

    The last 3 years has seen a never ending spike in premium increases, proportionate to the decline in New business sales.

    It appears that no-one in authority seems to see the blindingly obvious, in that if you create unworkable restrictions of trade, then throw in a maze of complex regulation that requires substantial legal and audit “protection,” which increases the cost of doing Business and slows down to a snails pace, the ability to bring in revenue, then the result will always be the same.

    Licensee fee increases will only be controlled, when Licensees demand a complete overhaul of the current unworkable regime.

    If the Licensees do not act, they will not survive.

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