Best advice firm's secrets to success

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Troy MacMillan is the managing director of The Wealth Designers (TWD), which both the AFA and the FPA have come together to name as Australia’s best financial advisory practice.

TWD started in 2009 with four employees and has now grown to 15 – 19 if you include the board of advice.

Macmillan says he set out to create “a new world” of financial advice, but finding quality people has been one of the biggest challenges for the business so he has branched out to other professions to find the right people. This includes accountants, stock brokers and even legal practitioners.

He says that it is the quality of people that he is most proud of, and that has ensured the company's success. However, he has also had to make some tough decisions on letting go of people who couldn’t grow with the team. This includes clients as well as advisers, but to deal with his dilemma, Macmillan set up another business, Shape Advisers, which is tailored to service less complex clients.

“The ideal client for us has to have perceived complexity in their financial affairs. If a client doesn’t perceive their financial affairs to be complex, they will never actually want to pay for advice,” said Macmillan.

One such client that stands out to Macmillan is a woman he recently met with. She owned a successful cleaning business, which she started from scratch, but was always on call because her employees were unreliable.

She was in her 60’s and wanted to pay off her mortgage, but when Macmillan dug deeper he says that she burst into tears and said she just wanted time with her grandchildren.

“She said…’I feel like as a mother, I didn’t spend enough time with my children. And here I am 25 years later and I’m in the same position again, I’m doing it with my grandchildren’.

“When we came back to see her again, we gave her a plan that clearly showed her that she could retire today and as a result of that she could spend all this time with her grandchildren. So that’s what she did.”

Despite concerns being raised about FoFA during his roundtable with other finalists, Macmillan is positive about the outcome of the reforms.

“It aligns the financial planning industry more so as a profession now by having clients really understand what they’re paying and hopefully understanding why they’re paying it. I can only think of that as a good thing when it comes to advice.

“It has been tainted a little bit in the past, by clients having this perception that there’s all these commissions and you don’t know what you’re paying… if we can clear that up I think as an industry that’s a really positive thing.”

He’s now 43 and enjoys his position so much that he can’t imagine retiring, but says that they have a plan in place. Just like his clients, he says that he has goals, but would like to continue doing what he loves for as long as possible.

  • James Smith on 3/09/2013 3:20:34 PM

    Pat the concern I have is that the lowest common denominator ( eg the examples you have come across ) is influencing the regulatory debate and therefore examples of better practice are required to level the debate. If you are concerned about 2% super fund costs you could start by acknowledging the costs of complying with the FOFA regulation. The other reality is that increased regulation will be adhered to by the better practises and problematic for the poorer/unethical operators. As a result we keep going around in circles chasing the tail of the later's behaviour while our costs escalate. Rather than increased regulation ( which will not solve the problem ) why not simply encourage clients to shop around in acknowledgement that there will be good and bad operators in any industry. The fact that you are seeing these poor SOAs suggests the market forces are working !!

  • Pat on 3/09/2013 2:42:58 PM

    James,

    Firstly, careful with your assumptions - I am an adviser;
    Secondly, do not extrapolate from your own behaviour - as mentioned, I have seen many SOAs in which the disclosure is as per my description;
    Thirdly, I do agree with much of your sentiment. That ASIC is more concerned that a client gets their FDS within a prescribed timeframe than the fact that the client may or may not be paying horrendous advice fees and paying 2% p.a. for a super fund is ludicrous.

  • James Smith on 3/09/2013 1:31:07 PM

    Hi Pat presumably you are in some sort of compliance role. If so, you could make an enormous contribution assisting dealers make the disclosure more meaningful. In our SOAs we disclose all the fees ( fund manager/ wrap/admin/adviser fees ) in an excel spreadsheet showing % and $ amounts with additional notes to explain buy/sell spreads, performance fees,transaction costs etc. This is all on one page in the body of the SOA. We have been doing this for over a decade. We also attach the disclosure requirements for the dealer in the attachments because they have an inflexible approach in how to disclose fees . The other challenge we face is that the fund managers disclose fees via their PDS in a different format again, annual reports are sent with fees in yet another format and so we spend an inordinate amount of time explaining to clients what the fund managers have sent them. What we need as an industry is a standard format for ALL fees to be disclosed on one page. The current emphasis of FDS on the disclosure of adviser fees misses the point. Clients need to understand ALL the fees they pay on one simple page that is incorporated into business practises. Anything short of that is a waste of time. The solution requires working collaboratively on a solution rather than singling out advisers and to ensure that any legislative requirement (such as the FDS) is adequately assessed before being imposed on adviser businesses. This has not happened. Hence FDS is a waste of time at enormous cost to the industry and reflects poorly on the regulators grasp of the issue. It is also disappointing that the regulators seem to assume that the advisers are the bad guys despite the fact that trust and honesty is the cornerstone of our value proposition. Why isn't there more focus on the industry fund fee disclosures and the retail fund manager PDS and fee disclosure ? The reality is that of all fees clients pay, this is the area that is least understood and has the greatest level of change. Why won't industry funds agree to unit pricing ? Why are they allowed to resist incorporating all their fees into a unit price ? Why don't we have a regulated annual fee disclosure that incorporates all fees so that any changes in fees are identified and understood ? Why are compliance areas so inflexible and out of touch with client needs ? Why aren't compliance people like yourself up in arms at how inadequate the FDS requirements are in stipulating that some adviser fees need to be disclosed but not others ? You are critical of the current disclosure practises but you make no comment on the adequacy of the FDS requirements ? Why not ?Why have we been disclosing ALL these fees on one page for over a decade and no one has ever asked us for our opinion ? The irony is that those that are the most critical of our industry show such a poor understanding of the solution required. The pot calling the kettle black ?

  • Pat on 3/09/2013 10:09:46 AM

    James, I have seen many SOAs from different advisory groups and the disclosure of fees is legal but woeful. The general idea is that:

    1. The cost of the advice is something;
    2. The dealer group may pay part of this to the adviser;
    3. The product provider may pay a % fee to the dealer group
    4. The dealer group may pay a % of this % fee to the adviser
    5. If the adviser achieves certain targets, they may receive a % bonus of the $ & % fees paid by the client or product provider
    6. This is not an additional cost to you (but you are actually paying for it, but we want you to believe it is a gratuity by the product provider to the dealer group);
    7. This is all spread over about 3+ pages.

    This is not disclosure; this meeting a legal requirement.

  • James Smith on 3/09/2013 9:04:36 AM

    The biggest con with FOFA is the assumption that clients only need one off advice from time to time . The reality is that clients want ongoing advice AND service for a range of issues based on an ongoing relationship with their adviser. The big retail and industry funds attempts at service are failing them miserably. Advisers fill that void and need an income to support their ongoing running costs. Its pretty simple if you are running your own business. However if you get paid a fat salary to pontificate on what you think the world should look like ( or what improves the bottom line in the short term ) and then move on to another fat salary role if you get it wrong I guess it is no wonder we are in the situation we are in. Sadly even though there are relatively few fat cat salary roles and significantly more jobs created via small business the fat cats are ruling the roost at the moment. A coalition government that understands small business, customer service and employment growth is the key to putting an end to this madness. And please can we stop linking FOFA to professionalism - have confidence in our existing practises and stand up for them - regulations will come and go - customer centric professional business practises define our success -not a sales pitch.
    Clients know. If you are not getting regular referrals look to change something. Otherwise get on with it. Also if a client does not want to take advice or pay fees for your service - they are not a client. Refer them to the fat cats and let them fight over them.

  • Alistair on 2/09/2013 4:12:32 PM

    Agree and Troy please keep up the good work. I take inspiration from Troys efforts and I agree with James in that FOFA has certainly not taken into account the hard work we as advisers do for our clients in good times and bad. Yes clients pay a fee, but they are also comforted by solutions we provide as an industry when times are at their most difficult. Sometimes it is in the midst of a passing of a client as we provide a cheque thanks to the advice we have provided. I have seen this many times in 28 years.
    The approach taken by FOFA is an utter nonsense. Filling in forms and incredible amounts of paperwork for the simplest of tasks and removing the right of the client to determine how they wish to pay for our services is merely pandering to the Union funds which of itself is questionable as they are not playing by the same rules as us.
    No other industry has had such a targeted missile campaign of legislative nonsense as has ours.
    Heck, my phone, internet provider or any other subscribed service does not have such stupidity.
    Improving an industry is one thing. Destroying lives and making processes so complicated just to justify their existence is such a poor excuse for any politician.
    September 7 sees the end of this garbage of Labor and their pathetic behaviour towards business in general. They speak of saving jobs but compromise the very thing that creates a job. Businesses and their owners who have mortgaged their home in many cases to create that enterprise.
    Our industry has been on the receiving end of both economic mayhem from the world which we can only work with when it comes to our clients and legislative theft when it comes to taxation via super or other assets as this directionless government seeks to fix a mess caused by their sheer incompetence. September 7 people in FP land lets throw this lot out. That way all advisers can focus on the client, take a leaf out of Troys methods and get on building successful businesses and vastly improve that other corporation from being a failure. Australia. Cheers

  • James Smith on 2/09/2013 10:06:45 AM

    It amazes me that advisers, especially an apparently successful adviser such as MacMillen, still hold the view that clients do not know what they are paying and what they are paying for and that somehow FOFA will awaken the truth ? The pre FOFA regs have had specific requirements for advisers to disclose fees in their SOAs and SOAAs for years ? Agree for the need for quality people. That is what the focus should be on - raising the quality of support across the industry and mentoring new advisers - sadly FOFA emphasises more paperwork for advisers and opening the door for big institutions to engage with customers directly despite their proven inability to recruit and manage quality people. The banks and industry funds agenda is clear. They want to increase FUM via direct contributions at the lowest cost to them as possible. The reality is they are cutting off their noses to spite their face as they will not be able to retain clients who do not want to be treated like a number which is inevitable without quality people and relationships. The irony is the biggest losers in the medium to longer term will be these big institutions as both advisers and clients abandon them in dismay. All we can do in the interim is try and limit the collateral damage of their mistaken agendas via FOFA. The works begins Sept 8.

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