So you’re considering changing licensee?

If you’re unsatisfied with your licensee at present, you’re not alone. Adviser Ratings research showed that 14.4% of advisers switched licensees in the year ending Q3 2020, and we’d suggest that the number of advisers contemplating a move is higher still. 

In addition to those who have been forced to find a new home as their current licensee has closed, there are many disgruntled advisers who are finding their licensee is hindering, rather than helping them to serve their clients well. We hear that advisers are feeling unsupported through the legislative minefield they’re navigating, that their licensee is applying a ‘lowest common denominator’ approach to compliance (where, if in doubt, the solution appears to be more paperwork and checkboxes rather than common sense and client outcomes). We hear of licensees applying today’s rules to client files of yesterday, and we know that many have implemented significant increases to licensing fees, with little uplift in the quality of services provided. 

At what point does ‘better the devil you know’ give way to ‘the grass has to be greener on the other side’; and how do you ensure that you don’t go ‘out of the frying pan and into the fire’???

All too often we see businesses make the huge move to a new licensee, to discover months in that they may have resolved one or another challenge of their original provider, only to uncover bigger issues to work through with their new provider. Changing licensees causes significant disruption and cost to any business, even when you make the ‘right’ choice – and the analysis and selection process to get to that choice can be overwhelming.   If you’re making a change, you certainly only want to do it once! Having clarity of purpose, defined criteria and a robust process is critical in the selection process.

We’ve supported many of our clients through this process, and we’ve been asked for assistance with this issue so often that we’ve created a handy process that advisers can follow, to make sure that they’re making the best decision for their unique situation. Our Evolve Alliance members can download the full guide, including a handy comparison tool from their portal, and we’ve provided a summary here. You might like to know that Elixir Consulting does not own shares in, or receive a benefit from swelling the numbers of any licensing service provider. We recognise how important it is to maintain independence when helping with such a crucial decision and we understand that the needs of advisers vary, depending on their unique business and their own growth plans. The right licensee solution for one business might be very different to the next.

So… where do you start? Before considering any move it’s absolutely imperative for you to have clarity on what problem/s you’re solving for.  Many licensees have well-trained recruitment managers, who have finely tuned their sales pitches and recruitment tactics to distract advisers with ‘shiny’ solutions that they never knew they wanted. Sometimes, that’s beneficial – when you’ve been in a sheltered environment, you may not know what is even possible – and yet sometimes the shiny attractions only serve to distract your attention from flaws in their offer. To avoid being distracted, get clear on what you want before you start looking at what’s on offer. 

If you have a team, you’ll also want to keep them in the loop at the appropriate time. Helping them understand why you’re making the move and why you’ve selected your new provider will better enable them to support you through what will inevitably be quite an upheaval! 

Step One – What are we moving away from?

Make a list of all of the reasons why you’re choosing to leave your current provider. What, specifically, are the triggers that gave way to this move? Or, if you’re not leaving by your own choice, still make a list of the niggling elements of their offer that used to hold you back.  Get as specific as you can, so that you can craft your search for your replacement, and ensure that it’s more than a personality clash or a result of frustration caused by elements external to your current provider.

You’ll also want to understand at this point, what the exit process is from your current licensee, in order to help you assess how your future licensee will support you through your transition, and plan your move well.

Step Two – What are we looking for?

Document your ‘wish-list’ of services and support that you want from your new provider. Again, be as specific as you can. Start by listing all of the ‘basics’ (eg if you’re wedded to a particular software system, ensure you’re able to keep using it), then list your more extensive desires, regardless of how unlikely they may seem. Once you have exhausted your ideas, refine your list into ‘not-negotiables’ and ‘nice-to-have’s’. 

Step Three – What information do we need from each licensee? 

Now that you know what you’re looking for in your new provider, spend some time considering what you’ll need to explore to be able to determine one provider from the next. Being able to run your business the way you want to is important, and so too will be things like the future growth plans of your provider, and how they’re resourcing up to support their own growth. You’ll also want to be very clear on their onboarding process, and how they will support your transition to them. Will every client be required to sign an  acknowledgement or receive a Foundation SOA? This may be determined by the licensee you’re leaving OR going to OR both.

We’ve developed a template comparison table in Evolve Alliance that you can customise for your own use here. There’s a handy list of elements that you’ll want to consider and analyse from the licensee, and you can customise it to suit your needs.  This is a critical step to help you compare one offer to another, and not get distracted! For example, if you have or prefer an independent business coach then business planning services are irrelevant…. if you already have a community of peers and thought leaders then however they foster community is not a consideration for you. If you’re not a member, take the time to make a list of all of the elements that are important to you when selecting your new partner.

Licensees all seem to represent their offer in different ways and it’s not easy to compare apples with pears – some include software and PI in the fees, others don’t. You’ll want to list what your business needs – now, and also considering 1/3/5 years in the future (if you’re growing staff and needing more AR’s, software licenses etc) in order to compare absolute costs between providers

 We suggest you also consider if there is anything you currently do that is particularly innovative or out of the ‘norm’, find out how the licensee will respond to this. 

Step Four – Find your new Provider!

To start your search, you might speak with trusted colleagues – other advisers, BDM’s; to create an initial list of providers to consider. Rather than putting all of them through a thorough grilling process (time consuming for you and them!), select your top three most important factors you’re looking for in a licensee, and ask them about those factors. You might whittle down a list of ten to a more manageable 2-3 to then undertake further due diligence with, or it might take some further digging before you strike some from your list.

You might like to include ‘self-licensed’ as an option, in which case, reach out to an independent compliance provider who delivers licensee solutions to understand the costs and commitment involved, in order to determine if this is a viable solution for you.

Work through your shortlist and complete your knowledge of their proposition. Some of the information will be readily available from the recruitment manager of the licensee, whereas some other elements will require personal conversations with people inside and external to the organisation. We always recommend that you seek personal references or feedback from other advisers in their network, and often BDM’s from product providers can also provide some good insights. You’ll likely get a more thorough view from chatting with people you know rather than purely those they put forward as a referee.

When you’ve compiled your information, summarise the true cost of each option for your business, to better enable you to compare the full picture. Your final decision should take cost into consideration, but it should not be the single deciding factor. As they say, you get what you pay for, and you might find that a ‘cheap’ option costs you a great deal more than expected if the model is unsustainable.

Once you’ve decided who you’ll move to, be sure to circle back and let the other contenders know.  You never know where these people might cross your path in future.

Step Five – Plan your transition 

Once you’ve decided who you will move to, map out your plans for transition, with realistic time frames. Work with your current and future providers to understand how your client files will be transferred, (data migration to a new software system?), how your revenue will be managed in the transition period, etc. A good provider will be able to help you with a transition framework. You’ll also want to plan your communication to staff and clients.

There are a plethora of challenges that can arise in this project, so you might like to view the recording of our webinar series we delivered, exploring the process (with the bonus session on self-licensing). Evolve Alliance members can find this in their portal under Corporate Governance.

Regardless of what you decide to do, be very clear on your purpose for change and avoid running towards the shiny sales offerings that don’t align with the vision and purpose of your business. 

 

Elixir Coaches
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We help advisors to evolve their business and thrive in the new landscape of financial advice by providing expert guidance from with deep knowledge and expertise in business and financial advice.