Introduction by Colonial First State general manager of distribution Paul Barrett
The provision of quality advice from quality businesses has never been as important and visible. This year has been a remarkable one for our industry with the introduction of the Simpler Super reforms standing out as a highlight.
Events such as this illustrate the need for sustainable financial advisory businesses that can continue to provide quality advice through thick and thin. The future for advisory businesses comes with even more responsibility.
These are the challenges facing the practices of the future, and are challenges this year's six finalists in the Practice of the Year Competition are addressing.
The judging panel was certainly engaged in robust discussion around the final order, and its members learnt a lot about what separates the good from the great. There were a few interesting themes prevalent this year.
Firstly, the level of corporatisation of practices is increasing at an incredible rate.
We are also seeing even greater focus on talent management, induction, training and succession. A large number of practices now operate with pod-style structures that place planners, paraplanners and administrators in nimble partnerships. Incentive schemes and career plans are also becoming more common.
Principals are focusing more on building a great organisation that will stand the test of time.
This year we also observed a great deal of innovation from our finalists.
And most importantly we saw a focus on advice quality. The great practices have turned compliance into professionalism and are constantly looking to lift the bar.
I would like to congratulate the final six for their outstanding achievements to date, not the least of which is the contribution they have made to the lives of many Australians.
I would also like to note Colonial First State is delighted to be the major sponsor of the IFA Practice of the Year Competition for 2007.
WB FINANCIAL - WINNER
Finalists: TFS Financial Planning, Ward Financial Group, Gowdie Financial Planning, Infocus Maroochydore, RMG Financial Services
Stephen Blaxhall
Paul Carroll knows where his practice is heading.
On July 1 next year, dealer group WB Financial will be taking a 20 per cent equity stake in his St Leonards-based practice and equity will be offered to staff in 12-monthly intervals.
"I don't see the day that I will divest myself totally of the business, as I also have a son working there, but it's been an interesting journey," Carroll says.
The outcome wasn't so certain around 11 years ago when he quit the safe world of teaching for the world of insurance.
"My wife asked me how much I was going to earn and I had to tell her I didn't know because if I sold no insurance I got nothing," he says.
After a spell selling just insurance, the former teacher decided he wanted to build his own financial planning business and that he could use his different experiences to grow the business.
He targeted teachers, knowing they required help with their finances and he could talk their language.
"With great respect to teachers, their typical situation is usually husband and wife teacher, with one of them only working part-time raising family, and generally their income is inadequate," he says.
"There are a lot of cash-flow challenges and generally no awareness of how to deal with the issues.
"They have never left the classroom in terms of worldliness and financial literacy."
Having a network already in place made life a lot easier and with his kids also at school, Carroll became an active participant in parent/teacher circles and his client base began to grow.
"We worked the law of numbers and simply ran a seminar every quarter at a central location targeting the [Sydney] north shore," he says.
"We covered the same thing every time, and that was 'how to manage personal finances - creating wealth strategies for schoolteachers'."
Running up to 12 seminars over a three-year period gave the business the momentum to take off. Referral then became a big part of the business. Now, Carroll's practice shows how he has integrated another aspect of his life into the business. The practice has been built around a corporate structure, something he learnt as a state manager in the insurance business. For Carroll, risk management underpins the practice.
"We don't run any meeting with clients without two advisers being present. It's to do with business efficiency," he says.
"From the day the first employee joined the business, which was about 12 months after the practice started, the philosophy has always been to have the client understand that they are building a relationship with the business, not an individual planner.
"The logical extension of that is our business structure, which was the creation of business pods."
The practice currently has two pods, each with a lead adviser, an associate adviser and a trainee adviser.
"With a drastic shortage of good people, we believe there is value in providing a career path within the organisation for our trainees to follow. Hopefully this makes it less likely that they would want to seek opportunities elsewhere," Carroll says.
The practice is currently looking to add a third pod. Each business unit looks after between $1 million and $1.2 million of revenue and about 150 clients. The practice currently has about $80 million in funds under management (FUM).
"Because we are predominantly a fee-based business, most of our revenue comes from fees rather than in FUM," Carroll says.
The current profit for the practice is currently budgeted at $2 million and over the next five years Carroll sees that doubling, with the practice looking to add a fourth pod during the companies next five-year plan.
The group's client base is segmented, with each pod having platinum, gold, silver and blue clients.
"A fundamental part of our risk management strategy for clients is a whole communication program," Carroll says.
"Wrapped around each client's financial plan is a documented service package, for which we collect fees on a monthly basis. At the top end we would have a formal communication with clients 26 times a year."
Study for staff is actively encouraged, with the practice reimbursing 50 per cent of the cost, if that study is successful. The practice currently has two certified financial planners and one just starting out on the course.
