A community of commitment, trust and companionship

As a part of its wealth management series, Money Management speaks to financial planning groups for their views on the industry. This month, Money Management spoke to Futuro Financial Services’ executive chairman, Dennis Bashford, and managing director, Paul Kelly.

Money Management: What are the strengths of your business and how well are you positioned for the future?

Paul Kelly: We have got two licenses, Futuro Financial Services and Insight Investment Services, where Futuro was our original licence and has been operating successfully for over 20 years.

We bought Insight in 2016 and we have left it for nearly two years, however like all mid-sized Australian financial services licenses (AFSLs) we spent a lot time and effort over the years in trying to recruit planners to our businesses.

And during the process, we found that Futuro had a terrific offering around helping the firms grow, something that we have been doing for a long time and there is also a very distinct community atmosphere around our offering with Futuro. We meet the firms, mostly on a face-to-face basis, about six times a year plus we organise a couple of conferences on top of that.

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This is because the traditional financial planning business is a relatively small business, it is typically a one-to-two man practice so it offers a lone existence. Therefore, for a lot of planners, this is the way they can come together as a group and get the support that a group can offer by getting the leverage to work out of the experience of another person who has been on another path which can make that journey a lot easier.

There is also a certain price structure that comes with it. It’s like Qantas but Qantas also has Jetstar. Some people have very good businesses and they will not need us to help them with their business and marketing plans and all they need is just good clean compliance services.

Dennis Bashford: Insight is really an offering for the larger firms, who are pretty self-sufficient but Futuro and Insight are two very separate offerings. 

Our motto is the community of commitment, trust and companionship – most of those sounds very nice but it’s pretty much what it is. It is a community where planners do talk to each other all the time and they trust each other. 

MM: How do you approach the recruitment process of new planners? Are you recruiting currently?

PK: Yes, we are looking at the practices from former banks and instos as I do not think there is an AFSL in the country right now that is not looking at the fallout from what the instos have been doing.

We will never be a firm that wants a thousand planners and our focus has always been on the relationship with the underlying firms. I see people talking in the press about wanting 300 to 500 planners and I have never understood why people quote adviser numbers as my preference – when I look at what we want to do – is on the relationship with the client who puts his life on the line to create assets for him and his family moving forward. If I can have overall 100 good practices that work well with us then I think it is a really good model for us.

DB: Having said that, there is a significant portion of those [planners] you probably would not want anyway. A lot of planners were relying on grandfathered commissions and many of them had not grown their businesses. We want people who are exciting to be around, who will share their ideas, and whose ideas are worthwhile listening to. No one wants people who look for a place to lie down.

Also, all of the AFSLs need to have a good, what we call, a ‘hygiene practice’, so the AFSL, particularly a mid-tier AFSL, needs to have good processes and systems around things such as the IT systems and compliance regime that all work and fit together.

MM: Would you consider any acquisitions at the moment?

PK: I am not sure we would buy an AFSL per se. Would we be open to bringing new advisers in from another AFSL in a deal like we did with Ausure? Yes certainly but there is a massive amount of due diligence work that goes into that.

If the question is whether we would buy the underlying AFSL itself? No. In today’s world I do not think it is particularly prudent course of action as there is too many risks associated with that. So are we doing another Insight’s deal? Probably not.

DB: With the Ausure deal – we took the advisers but we did not buy the licence. 

MM: How well are advisers positioned for the future?

PK: If we look at where these advisers are coming from – they have been through all of that turmoil, they have been through all the compliance restructure of their businesses and they have committed to stay within the financial planning. So I think they are actually very well positioned for the future. They are very clean and they have a compliance regime and understanding of what their environments are and they have the good handle of it. 

MM: What are the key challenges for advisers across the industry moving forward?

DB: Part of that challenge is actually around pricing. The advisers in some businesses have had the product support licencing regime which was cheap and they had a really good deal. But if we look at the pricing structures inside the licences now, it is more, in some cases significantly more, than what these firms were having inside the instos so the challenge for both the advisers’ firms and for the AFSLs is to understand this is the cost.

We are certainly not the cheapest but we are also not the most expensive either. There are two different price structures for two licenses and there are no special deals, every planner and adviser and business in our network knows what those arrangements are and everybody has trust that’s what the deal is.

PK: To be sustainable as an AFSL, there is a certain amount that you have to charge so if I were an adviser looking to move then I would have to question some of the really very cheap deals because if you do not operate profitably you cannot reinvest back into the business to protect it. At the end of the day, we need to be compliant and if you do not have the funds to do that then everybody is at risk so profits are very important and that means that there is a certain price that the AFSL needs to charge.