One year in, Advice Evolution is claiming success in its licensee model, which has proved profitable without relying on volume bonuses or product rebates.
The three partners that founded Advice Evolution previously worked for one of the bank dealer groups, but left when they couldn’t get equity in the licence. They created their own licensee, Advice Evolution, and now everyone that comes in gets equity in the licence via a unit trust.
CEO David Harris says, "It is the equity in the licence that makes all the difference to adviser attitudes. We talk to clients everyday about the differences between renting, and owning your home, but how many advisers apply the same philosophy to their right to operate?"
Harris says that there is too much waste in current licensee models. “They now have these massive big offices in Sydney, and cars and BDMs, and things that aren’t necessarily producing anything.”
“The big licensees tend to waste a lot of their money through paraplanning and tend to hide it all through their big buildings and staff...”
After changing licences, Advice Evolution outsourced most of its back office services. Harris says they take a small commission for day-to-day running, supplemented with income from on-going fees and interest on the trust account, and distribute the rest back to advisers. But he says 100% of the rebates from manufacturers go through to advisers. “In the smaller dealer group area it’s the rebates that keep those licensees afloat – they use that money to maintain the licensee. Because we run it quite economically… that allows us to pass all that money through.”
Harris is encouraging other advisers to think about the licensee model, and Chairman of the group, Grant Simpson, says that it will become more popular with FoFA reforms. Advice Evolution will also be looking to expand from 10 firms to 20, with up to 50 advisers.