Take back control

Santi BurridgeIf financial advisers want to be in control of their own destiny, they have no choice but to seriously consider independence.

In Australia many advisers are or want to be in business for themselves.

They like the independence it gives them and control over their destiny.

They are family and community-minded people with a passion for their clients and the overwhelming majority have always acted in the clients’ best interest.


The paradox is that these same business people then give up all control to a conflicted licensee who has very different objectives.

The industry from the 1980s has evolved from tied agents to multi-agents to independently-minded advisers who built their own master trusts (the early administrative platform) only to eventually sell out to large institutions who took the opportunity to control product distribution with all the inherent conflicts that entails.

This has led to an environment where innovation and independent leadership has been supressed.

The leadership in these institutions say being independent is a risky game (due to the lack of a big balance sheet and corporate support) and is to be avoided, and there is some merit to this argument especially if advisers are running businesses based on old systems and processes that were designed to protect the lowest common denominator.

However if you are not wedded to running that type of business, being beholden to an institution should be avoided for a progressive, independently-minded adviser.

In the US it seems the institutions have done everything they can to say that being independent is scary too, but the big institutions appear to be under severe pressure to move away from product-centric models.

The move to independence has been gaining momentum for the last decade with $2.5 trillion of FUA now managed by independent advisers and expected to double over the next 4–5 years.

With 13 per cent pa more growth than the institutional market over the past 10 years the independent numbers speak for themselves.

Creating or joining with an independent licensee does not necessarily mean that you are going to have a better business, unless you are willing to put your personal preconceptions aside and really challenge your business model and value proposition.

Globally, the best advice businesses deliver a consistent client experience through a common investment service built on leading technology.

All clients are remodelled at the press of a button and they engage the client proactively and regularly with relevant communications across a range of mediums.

The most successful business owners have transformed their role from being a player on the team to being the coach, and have built scalable businesses that do not depend upon themselves to grow and thrive.

They focus on what they can control, demand liquidity, are after-tax return focused, and understand that asset allocation is what they need to get right for their clients.

Most importantly their propositions are built around guiding and helping clients towards being able to achieve their goals, not by claims about being able to beat the market or create portfolio alpha.

Research from State Street Global Advisors has found that the number one reason clients leave their adviser is their goals not being met while portfolio performance ranks down at seventh on the list.

The realisation that selling performance or the ability to pick the next winner is in fact a flawed business model is well underway.

Further, the concept of remodelling client portfolios only when they happen to be due for a review, and implementing asset allocation and portfolio changes on a client-by-client basis is far from a world-class scalable business model.

But it is a process the large Australian institutions will continue to encourage advisers to use, as they continue to build consumer direct propositions that will allow them to circumvent advisers and compete directly for the client.

The giant US broking house Charles Schwab has expressly stated they are entering the portfolio management market with a direct-to-consumer model which will be ‘easy’ to use and in fact be free for investors.

It’s also interesting to note that this is exactly what happened in the UK once advisers, driven by regulation, changed from being buyers of institutional product to sellers of advice.

Nearly every major institution has or is building a consumer direct proposition, and in some cases have simply walked away from the intermediated advice market.

These direct-to-consumer services want to engage your client because they know that an annual review meeting where an adviser recommends a fund or stock switch is not what the client wants.

What they do know is that the client needs to be educated about their portfolio and understand how it is tracking towards their goals.

They will in essence do what the industry super funds have done to retail funds and say ‘cheaper is better and here is the proof’.

So how can Australian advisers defend their businesses? Quite simply it is through client engagement and technology.

You need to build a scalable business that delivers a consistent client experience and one where you can engage the client on an ongoing basis and not just at their annual review.

Where you can communicate seamlessly across the client base about their portfolio and have the ability to remodel all clients at the press of a button remembering their individual objectives and preferences.

By placing technology and scalability at the core of your business and doing away with the lowest common denominator systems built to handle complexity but which add no real value to the client or to your business.

The product days are over; it is the now the age of the consumer.

Advisers need to take back control of their business and focus their service proposition around building strong relationships with clients.

We know this is where all the value lies, and no computer can replicate a human connection.

Surely control is the reason we all went into business for ourselves.

It’s time to get it back, and to me it is obvious that there is only one environment that allows this to occur.


Santi Burridge is managing director at Implemented Portfolios and a director of Treysta Wealth Management.

He has been pivotal in the development of IP’s individually managed account (IMA) and Dynamic Asset Allocation process.

Santi has 15 years' experience in the financial services and advice industry, working as both a financial planner and principal of a leading wealth advisory practice based in Sydney.

He holds a Bachelor of Commerce majoring in Finance and Economics and a Diploma in Financial Planning.


Take back control
santi burridge
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