Will advisers shun Insignia’s salaried advice model?

The restructure of Insignia Financial’s advice network into two parts could lead to further adviser attrition than initially forecast, Morningstar believes. 

Insignia reset its financial advice operating model last July by launching a separate partnership model called Rhombus Advisory focused on self-employed licensees. This comprised RI Advice Group, Consultum Financial Advisers, and TenFifty.

The remaining Bridges and Shadforth advisers are still under the Insignia AFSL and classed as salaried advisers. 

But Morningstar equity analyst, Shaun Ler, said there may be remaining advisers who would prefer to be under a licensee model. 

“There could be further adviser attrition than we expect. A salaried structure may not appeal to advisers who are more entrepreneurial or those who prefer to actively build their client book.

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“Unlike salaried advisers, licensee advisers tend to have greater incentive for growth as their remuneration is often linked to the amount of business written.”

At the end of 2024, Rhombus Advisory had 490 advisers while Insignia had 221. Wealth Data shows Rhombus has since gained two advisers while Insignia has lost eight, moving down to 213. Seven of the eight losses came from Bridges. 

But founder Colin Williams disagreed with Morningstar that the salaried advice model was the lesser one.

“It’s quite hard to compare large salaried models to the traditional self-employed models as there are now so few salaried models around after the banks pulled out. I don’t think every adviser wants all the hassles that come with running your own business and happy to draw a good salary and other benefits,” he said.

Other major changes that have affected Insignia’s advisers include its sale of Millennium3 to WT Financial in December 2023 and the exit of Godfrey Pembroke from Insignia’s AFSL in March 2024 to become an independently run business.

To mitigate against this occurring, Morningstar noted Insignia has been enacting multiple initiatives to strengthen its competitive position with advisers. This includes by investing in digital tools to enhance adviser productivity, having already flagged an increase in artificial intelligence usage to help its financial advisers increase revenue per adviser by 62.5 per cent by 2030.

Regarding clients per adviser, Insignia’s salaried advisers currently service 100 clients each and there is an opportunity to increase this to 115–125 by FY28 and as high as 140 by FY30, a 40 per cent increase in client numbers. Moving onto revenue per adviser, advisers currently report $0.8 million in revenue per adviser and the licensee expects this to increase from $1–1.1 million in FY28, and to $1.1–1.3 million in FY30, a 62 per cent increase. 

“My view is that should be closer to 150 and we’re targeting that through investment in advice technology more broadly, but certainly leveraging AI and in that process,” chief executive Scott Hartley said.

“[AI] is absolutely a game-changing technology that we are embracing and we have embraced historically – we’re not new to this game – but will embrace more strongly to help humans do a better job.”

Ler said: “In the near term, Insignia will work on rationalising its platforms, upgrading its technology, and imposing higher standards. These initiatives should result in more productive advisers and cost-effective products, and less potential for regulatory breaches – all of which help Insignia rebuild credibility, strengthen its competitiveness of its advisers, improve the appeal of its products, and position the firm to capture future inflows.”

But from a financial perspective, Ler said the company would still face future headwinds as the wealth management space continues its evolution post-Hayne royal commission which will weigh on its balance sheet. 

“The wealth management industry in Australia is going through major structural changes and major participants like Insignia face headwinds, including further potential remediation costs to customers, more investigations by regulators, and potential class action lawsuits – all of which could weigh on its balance sheet strength.

“Insignia has about $111 million in client remediation cash costs which it is liable for but the risk is costs could increase. Regardless, we believe the balance sheet should remain resilient enough to withstand any likely additional one-off costs.”