Principals Community carves out space in self-licensed world

Almost two years on from the exit from BT Financial Group, The Principals Community managing director Kon Costas believes the group has found its feet as a standalone company.

BT announced in November 2021 it would no longer provide a service-only offering to self-licensed advisers, but the group ultimately ended up continuing under the leadership of managing director Kon Costas.

“The transition has been amazing,” Costas tells Professional Planner.

“I can remember the nervousness, together with the absolute excitement, of coming out of an institution, plus taking on the responsibility of bringing on our team on this journey.”

He adds the exit from BT has opened other avenues since the group is no longer tied to a single institution.

“Today we have open architecture around who wants to join and participate,” Costas says.

“It’s not open for everyone, but the activity we have from other providers and the recommendations and endorsements we get is now far greater than when we were part of the BT group.”

The group currently has 122 self-licensed businesses, but Costas believes they have capacity to support up to 150 practices.

“We had up to 130 as part of the community; however, we had many mergers happen of late which we have encouraged and facilitated,” Costas says.

“We continue to attract other like-minded businesses to be part of our Principals Community that supports our growth aspirations.”

The current 122 in the network authorise 1262 advisers, making its reach larger than two largest institutional licensees, AMP and Insignia.

Despite the high number of practices and advisers in the network – which still only covers less than a third of the 4000-odd self-licensed advisers in Australia – Costas says there is still a barrier to entry for the community.

“We can’t help everyone that is self-licensed,” Costas says. “We have our own due diligence process, we make sure that people that understand what we’re about as a community – that like-mindedness, cultural alignment, and attracting professional growth orientated practices is what we’re about.”

“It’s very difficult for us to support every self-licensed business but those like-minded, higher net worth businesses based on the ratio that we’re talking about [122 practices and 1262 advisers] gives you a bit context on the type of businesses we work with.”

Strength in numbers

Costas says the core proposition for the service offering is bringing peer-to-peer connectivity for sharing and learning between like-minded practices.

“If it’s a technology solution, an AI solution, if it’s a PI request, if it’s a research [or] investment capability – think about all the different things that businesses need to consider – if they had to go to every provider, conduct their own due diligence and every provider tells them exactly the same story that their service is the best in breed… versus sharing and learning from each other’s first-hand experience and insights,” Costas says.

“What we’re able to do is go to many of our business partners or service providers and negotiate on behalf of the community because we have the buying power there.”

When it comes to what keeps responsible managers and principals up at night, Costas says governance of the AFSL is the biggest factor, as well as making sure they’re across all the regulatory and legislative requirements.

The community has a 10-person team, including three dedicated state managers and three dedicated governance managers.

“The governance team are best in breed when it comes to governance and being across the detail whilst working closely with our legal friends to ensure our practices are across all of the legislative and regulatory requirements and obligations in running an AFSL,” Costas says.

“Our quarterly meetings are in person quarterly meetings with the practice. It’s not a ‘call us when you need us’ service it’s a structured program – we sit on the committee and chair some of those meetings to ensure that everything has been captured and covered.”

Costas didn’t expect the community to become a training education provider, but given it currently produces 60 to 70 hours of continuing professional development content, he believes there is scope to take further advantage of that offering.

“Ideally we’d love to take that to a broader market, because we’re doing all the hard yakka in developing the content with our education partners and specialist presenters,” Costas says.

“We’d love to be able to share that even broader in the marketplace because it’s there to be shared and the CPD is actually relevant.”

Building connections

In a business environment that favours scale, the community aims to leverage its networking ability to aid in the merger and acquisition process.

Noting the reduction of 130 practices to 122 in the network, Costas says the approach to pairing practices is finding like-minded businesses, in terms of culture, but offer different aspects that ultimately compliment both parties.

“Our focus is certainly with like-minded practices looking for scale – we certainly facilitate that,” Costas says.

“But there’s also businesses out there who would like to expand in particular area that they don’t specialise in today.”

Costas says there is a more attractive proposition for businesses who want to move into different areas but don’t have the capability.

“That like-mindedness of the community with the cultural alignment, the extensive due diligence, and the personal connection that they make via our state-based gatherings or national events,” Costas says.

“Two of the same doesn’t always work, because they’re already good at what they do but when you’ve got synergies of specialisation this can be very successful.”

However, the network still has many “high calibre” businesses who are comfortable continuing on their own journey, Costas says.

“[Those businesses] have solid year on year growth,” Costas says.

“We support a lot of our businesses through our business insights that we do each year where it enables us to compare key ratios of like-minded businesses and have a look at what levers a business needs to make adjustments to improve their outcomes and what they’re trying to achieve.”

As published on September 29 2023 in Professional Planner – https://www.professionalplanner.com.au/2023/09/principals-community-carves-out-space-in-self-licensed-world/#:~:text=Almost%20two%20years%20on%20from,feet%20as%20a%20standalone%20company.