Australia's licensee sector needs to dramatically change the way it operates within the financial advisory sector if it is to avoid extinction by reform, an industry white paper has found.
The paper, "The Licensee of the Future", by research group Core Data said the ideal licensee of the future would need to be large and vertically integrated with the ability to leverage scale or adopt a boutique model.
It found the mid-tier dealer group would be most at risk.
"The future of licensees remains somewhat uncertain . . . differentiation through products, services and leadership has never been more important," the paper said.
"Mid-sized players are likely to be swallowed up by opportunistic licensees seeking growth through acquisition, or be forced to exit the market as their business models come under increasing cost pressures."
The paper also found licensees would need to focus on cost, product and technology-based innovation to "free up" advisers.
"There is an overarching requirement for licensees to strengthen not only the level of engagement with their own advisers, but also improve the relationship advisers have with their clients," it said.
"This is likely to include the transition from the provision of comprehensive or holistic advice to a range of tailored advice solutions, including scoped advice."
The paper, dated November 2011, said the licensees that failed to add value for their advisory networks would struggle.
"To be successful, licensees need to contribute significantly to advisers' success and play a much greater partnership role in helping them connect with their clients," it said.
The paper was developed with the help of 12 financial advisory executives from both privately-owned and institutionally-owned dealer groups.
