A new U.S.-based advisor network is busy building out a profit-sharing mutual-type of business model that the founders think will find acceptance among advisors in the new post-Great Recession business environment.
Conor Delaney is a co-founder of Good Life Advisor Systems. In an interview with WP he explains the company's revenue model--the bulk of the company's profits will be distributed among advisors in the network rather than sent upstairs to shareholders, directors or principals. That is, the advisors in the network will split the profits that might normally be lost to the ‘overhead’ at larger, big-name firms.
According to Delaney, the new business model makes sense—in the wake of the Great Recession, having that big name on the door is not as important to clients as it once was. "This is a changing era in the industry. The big thing after market took a dive is that clients changed. The old dream was to be with JP Morgan, or to see the name Schwab on the door. That's what they grew up with. That's what the average person though they wanted to see on the door. But now they don't care. They don't want the big fancy stuff. After 2007 and 2008, people stopped caring about the name," says Delaney.
That is, the big-name banks proved as shaky and unstable as any other firm. Now, with clients more sensitive to fees than ever before, some advisors find it makes sense to give up the big-name and the overhead to simply provide solid advice and an ‘open’ product shelf. For advisors ready to make a go of it without a large organization backing them, Good Life is an option.
When we chatted Delaney was on the way to help a new advisor move into an office. Which is the way this network operates, by paying it forward; advisors already in the network will help the new guys set up their office. By leveraging the efficiencies in modern technology the company can provide a turnkey solution for advisors. There are all he 800 numbers and back-end systems comparable to a big firm provided through the Microsoft cloud.
But by creating a mutural-beneift model, the payouts can be much larger per advisor. According to Delaney advisors will keep up to 70% of the revenue generated, a much higher rate than the 30% payout at many big firms. Best of all, there is no proprietary product to sell.
Delaney has now spread Good Life Advisor Systems across seven states, taking in advisors from companies like Wells Fargo, Morgan Stanley, Edward Jones
and Met Life. The plan is to double our number of offices by next year to 18. "If we can move them to a more efficient platform and lower their costs while doubling their revenue, it's a win for everyone,” he says. "Many advisors are feeling the need to shift away from the big firms. In the recession the biggest names in the industry quaked and swayed. Clients are thinking, ‘why not got with someone you know, in your home time, with lower fees, a more humble office. Why pay for the name?’”
He compares the shift to the career of a chef. “The advisors coming to use are like a chef on salary at a restaurant. They’re sweating, killing it for the owners. But they don’t want to work for owners forever. The chef wants to open his own restaurant,” says Delaney. “This is what we’re doing.”