Adviser-owned, adviser-run: Godfrey Pembroke CEO on Insignia exit

Money Management speaks with Godfrey Pembroke chief executive Mark Fisher on the path to becoming an adviser-owned, adviser-run licensee.

It has been just over three months since the advice firm formally separated from Insignia Financial’s Australian financial services licence (AFSL) on 22 March 2024.

In February 2024, Insignia first executed a sale agreement with Practice Development Group – Godfrey Pembroke’s board – to return ownership of the firm and its AFSL to advisers under an existing arrangement from when Insignia acquired the business.

Godfrey Pembroke’s origins began in 1995. It joined MLC in 1999 which was acquired by NAB in a $4.5 billion acquisition in 2000. Two decades later, IOOF Holdings (now Insignia) acquired MLC Wealth, which included Godfrey Pembroke, from NAB in 2021 for $1.4 billion.

Insignia said the return of the Godfrey Pembroke licence to its advisers was part of its “advice simplification program”, and forecast the divestment to cause revenue losses in the second half of FY2023–24.

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As a result of the exit, Godfrey Pembroke is now 100 per cent independently owned by advisers in its member firms under its own AFSL. Fisher, who was appointed as CEO in 2020, described the transitional period as “really positive” for the company.

“We planned the extraction for a long time – it wasn’t a shock or a surprise. It was well-planned and well-executed,” he told Money Management.

“If you look back at Godfrey Pembroke’s history, it always had a desire to stand on its own as an advice business. That desire never really went away. When we joined Insignia as part of the MLC acquisition, there was an openness for Godfrey Pembroke, at some stage, to stand on its own.

“It’s very different from a lot of [licensee] models out there. This is genuinely adviser-owned, adviser-run. It’s a community of advisers that want to create what will be the world’s best AFSL for practices to be part of – that’s the goal.”

The extraction also aligned with Insignia’s own structural change, Fisher added, as the large licensee is looking to grow Rhombus Advisory, a partnership ownership model for self-employed licensees.

“[The exit] was a desire that Godfrey Pembroke had for many years, and then it was consistent with Insignia’s strategy of recutting how they wanted advice to look going forward. It was very much an aligned view of the future,” the CEO continued.

Reflecting on the three months since the separation, Fisher said its 60 advisers across the advice network are operating efficiently, with clients seeing minimal changes.

“All of our services, processes and systems that we set up prior to the exit are all working, and the advisers are functioning, most importantly, in a really efficient operating environment. The work that went into the extraction has paid off.”

The CEO also unpacked the tangible impacts of the deal. One of the key changes relates to where Godfrey Pembroke advisers now get their licensee support from, he identified.

“Most of the services were sourced internally through Insignia – from software, compliance, documentation and training. So now all of those services that they receive come from direct providers facilitated by a small licensee team. All the components of the licensee offer were rebuilt upon exit.”

However, certain aspects of the business have remained the same. This includes Godfrey Pembroke’s use of Xplan and Lonsec as its investment research provider.

Licensee growth on the horizon

Although the firm is not currently targeting M&A, Fisher noted it is having a growing number of conversations with practices looking to join now that it is an independently owned AFSL.

“It’s about consistent growth with the right businesses that fit what we want from our community. We have a very strong and close advice community with like-minded businesses.”

In particular, Godfrey Pembroke’s client base is made up of affluent, high-net-worth (HNW) individuals. As a result, it is eyeing out other like-minded advice practices that have similar clientele to join its AFSL.

“Our brand is very strong and has been for over 40 years in financial services. Now it stands on its own and has no ownership within an institution. It’s become something that people feel like they want to join, which is exciting.”

Following the Hayne royal commission and the subsequent shift away from institutional advice, Fisher expects the trend towards independence to continue in the future.

“There’s obviously been a natural move away from institutions, but I’m not anti-institution by any stretch. I just think the institutions, whether it be banks or others, have made that decision to move away from aligned advice and that trend will probably continue. We’ll now see that the largest groups, exclusive of the AMP’s, are independently owned.”

The largest segment of advice licensees is now privately owned AFSLs with less than 10 staff, accounting for 81.5 per cent of all licensees, according to Adviser Ratings.

“We expect this trend to remain strong in 2024,” the report stated.