It’s time to step away from conventional thinking that the only way a private advisory business can operate is with revenue from product sources or other areas, and embrace the new model, which is more like a professional services firm than an old financial planning dealership.
Establishing a professional partnership model in the tradition of major law and accountancy firms is a logical step for advice groups in the wake of regulatory changes, according to wealth management firm Koda Capital.
In an interview with financialobserver, Koda chairman Steve Tucker said he expected over the next few years that more advice businesses would offer equity ownership and a long-term career path to entrants.
“It’s time to step away from conventional thinking that the only way a private advisory business can operate is with revenue from product sources or other areas, and embrace the new model, which is more like a professional services firm than an old financial planning dealership,” Tucker said.
Koda had brought on 16 new partners since its establishment late last year and would soon gain enough scale to offer graduates a genuine alternative to professions like law and accounting.
“As the business becomes as big as we’d like it to be and brings young talent in, it creates that movement into a partnership and gives them the ability to learn and grow inside an organisation that is purely giving advice,” he said.
“Our thinking is if legal and accounting firms can provide pure advice to clients and succeed commercially, why does everybody think a wealth advice business can’t make money in its own right?”
Chief executive and partner Paul Heath added that as well as attracting high-calibre young graduates to the advice industry, the partnership model would also better align the interests of advisers and clients.
“For advisers, it creates economic alignment in that our shareholders’ and our advisers’ interests are co-ordinated around outcomes for the client,” Heath said. “It also fosters a cultural alignment in that there’s a genuine sense of teamwork and camaraderie.”
Heath said that Koda, which aimed to appoint at least 30 partners over the next three years, was born out of frustration that financial planning wasn’t viewed as a profession by the broader financial services sector or consumers.
The pair’s comments follow those of Connect Financial Services chief executive Paul Tynan, who this week remarked that regulatory changes would bring about a revolution in financial advice and related services.
“At the end of all this change, advisers will be highly regarded experts and their services paid for in the same manner as those of the accounting and legal professions,” Tynan said.
“The advice sector is seen as the pioneer for change, with other sectors such as mortgage and real estate taking note, as they will soon be dealing with similar changes.”
The greatest risk for advice practices bringing on Professional Year advisers is making an investment in non-revenue generating employees who then become attractive to recruiters for other firms once they finish their training commitments. But one of the country’s leading wealth firms, Koda Capital, believes it has found a way to create an attractive career...
Today US financial investment publication Barron’s, in partnership with The Australian’s business magazine The Deal, released their rankings of Australia’s Top 100 Financial Advisers. The rankings are based on a comprehensive national survey. This list offers clients and advisers a unique guide to the leading practitioners in the sector. The formula used to calculate the...
Subscribe to Koda insights
*Please note that the majority of research Koda produces and distributes is client-access only. Subscribing to the insights distribution list will only give you access to publicly available Koda reports.