WITH A background in professional tennis, four different university qualifications, including a PhD and post-doctorate and executive management roles at companies that include Kodak and Pacific Dunlop, Dennis Maddern has certainly enjoyed a vibrant and diverse career.
It’s the unique skills and insight gained from this extensive experience that Dr Maddern believes have contributed to the success of his financial planning practice.
Working for large corporate organisations enabled him to gain a thorough understanding of ‘big business’ principles, which he says he has applied to his own firm.
“We run this business as we would run IBM or Kodak or Pacific Dunlop,” Dr Maddern says. “And if there’s one thing big business teaches you, it’s the importance of having a focus on people, good financials, good systems, good procedures and scintillatingly good client service.”
His corporate background has given him the ability to operate an independently-owned practice with its own AFSL rather than following the downstream distribution channel of a bank or insurance company.
Dr Maddern says he is astonished that “80 per cent of the advisory firms in Australia are still owned by banks and insurance companies”.
This he finds deeply concerning when it comes to the future of advice.
He compares the situation to a doctor only recommending Pfizer products to his patients, not necessarily because they are the best but simply because the company’s licence was through Pfizer.
“It’s absolutely bizarre,” he says. “I think advisers really need to consider if they want to be in a conflicted, loaned position or if they wish to be independently owned and therefore like doctors, like lawyers, like accountants [who] approach the client on a fee-for-service basis with genuine independent orientation.”
When the client has come from a practice owned by a bank or insurance company, Dr Maddern says he can guarantee they’ll be in managed funds – due to the extra incentives given for placing a client in these products.
“The owner company – the bank or the insurance company – gets a clip of the ticket off the managed fund, a clip of the ticket off the platform involved and also the adviser will get a clip of the ticket in terms of an asset-based fee,” he says.
“We think this is insidious – we want no part of this.
“We want to have a fee-for-service basis where the client has genuine independent representation.”
Paying for independent research and using mostly direct shares and exchange traded funds are some of the ways in which Dr Maddern’s firm has achieved this.
“We call our portfolio service ‘direct portfolio’ because it begs the question if you are in fact paying an adviser fee, and you’re also paying a Ferrari driving fund manager, then who’s really managing your portfolio – in actual fact you’re paying twice,” he explains.
Dr Maddern says the rise of SMSFs means advisers are going to need to be comfortable with all asset classes, not just managed funds.
“The whole purpose of having a self-managed super fund is to have more say, be your own trustee and consider things like land, direct shares or property,” he says.
“You don’t need to be in some form of platform, because you’re adding a layer of fees you don’t necessarily need.”
He also believes education is an area the industry needs to address.
While the staff at his firm have tertiary qualifications, CPAs – and many of them have master’s degrees as well – some advisers from dealer groups have nothing more than a diploma or advanced diploma.
Dr Maddern believes that given advisers deal directly with people’s lives, this is insufficient.
“The barriers of entry to this field are too low,” he says. “This is an awesome responsibility that requires very high levels of skill.”
RThis article first appeared in the April 2014 edition of ifa magazine
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