What could Insignia’s new model mean for AMP?

With the potential for its co-equity model to usher in a new era of growth, AMP could look to follow in the steps of Insignia, according to Adviser Ratings.

In late July, Insignia announced its intention to reset its financial advice operating model by launching a partnership ownership model under the working name of Advice Services Co (ASC). 

ASC will be a partnership ownership model for self-employed licensees comprising RI Advice Group, Consultum Financial Advisers and TenFifty. 

The co-equity or partnership model “has demonstrated a potent capacity to drive business expansion in advice practices, providing a mutually beneficial partnership between licensees who have scalable access to technology, compliance and backend processes and advice firms”, Adviser Ratings said. 

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With this in mind, the firm speculated if it could also be an attractive option for AMP, and estimated one in three AMP and Insignia practices could be attractive for this as they have profit margins over 10 per cent and revenue over $1 million. 

AMP and Insignia account for around 14 per cent of the financial advice market, according to Rainmaker research in June, where they represent 2,315 financial advisers. 

“The prospect of selectively choosing top-tier advice practices, particularly those they already have familiarity with, could offer AMP an advantageous edge in terms of visibility and comprehension of their licensed operations,” Adviser Ratings said.

Looking at the current landscape, Adviser Ratings identified Focus Financial Partners as a leader in the co-equity model sphere. The firm is a renowned KKR-backed wealth management firm based in the US which has invested in advice practices, including Escala Partners and Brady & Associates in Australia. 

Similarly, AZ NGA, an offshoot of one of Europe’s largest independent asset managers, Azimut, has stakes in Melbourne-based accounting and advisory business Rose Partners, in McLean Delmo Bentleys, diversified financial group SCM, and most recently acquired a stake in advice firm, Foster Raffan iPlan this month. 

AZ NGA chief executive, Paul Barrett, has previously attributed its successful Australian market penetration to their strategic use of the co-equity model. 

“The co-equity model has enabled these practices to tap into the financial strength and strategic expertise of these well-funded groups,” Adviser Ratings said.

Speaking at the 2023 Stockbrokers and Investment Adviser Association (SIAA) conference, Neville Azzopardi, executive director for retirement at Colonial First State, believed foreign players who successfully broke into the Australian market “play the game very differently” to domestic ones.

“In the last five to seven years, you’ve seen players come back and they come back by stealth. I think about EFG International with Shaw and Partners, Focus with Escala Partners, LGT with Crestone,” Azzopardi said.

“I wouldn’t want to bet on coming here to hire a whole bunch of advisers to acquire clients. I think, if someone is going to come here and be successful, they’re going to do things fundamentally differently.”

Adviser Ratings said: “Perhaps, a well-managed co-equity model existing alongside a mass market solution, the latter of which AMP and Insignia are trying to crack and will no doubt compete with super funds, can ensure a balance between business growth and the maintenance of high-quality advice.”

The firm believes a strong, scalable tech stack and stringent compliance structure could mitigate the risks associated with a potentially reckless expansion. Licensees like Count have already led the charge here, it said, but Insignia’s move could “signal a seismic shift”.

“The co-equity model has the potential to usher in a new era of growth for advice practices,” Adviser Ratings noted.

“But do advice practices actually need licensees or is this the start of the adviser licensing/partner model akin to the accounting profession?”