Building bridges between the biggest and best

After experiencing growth of 10 per cent over the last quarter,Bridges Financial Services(Bridges) is eager for more.

The group has an ambitious plan to grow the adviser base by around 50 per cent by the end of its financial year in September, lifting adviser numbers from 130 to 200.

It’s all part of a much-needed expansion strategy designed to improve the profitability of the business.

Founded in 1985 by industry stalwart Colin Scully, Bridges quickly and very successfully cornered the credit union market. Today, the group has agreements to provide financial planning services to the members of 110 credit unions across the country.

But late last year, only two years after the sale of the group to theTower Financial Services Group(Tower) for $168 million, a $32 million writedown of the Bridges business was announced.

Profitability over the next two years is expected to drop a further 20 per cent, according to managing director David Bleakley, following changes implemented earlier this year which included more generous income sharing arrangements with financial planners.

The changes gave financial planners a better share of income from the group’s master trust, as well as a better cut of commissions for recommending the group’s other investment products.

The adviser/dealer split moved from 70/30 to 90/10, which the head of financial planning, Paul Brown, says is a significant change.

“In the past it’s probably been fair to say that we weren’t to market,” he says, “but now we are.”

The group recently altered the fee structure of its master trust, The Portfolio Service, by introducing a new tiered portfolio fee rebate and reducing fee levels for listed investments.

As a result of using that master service, planners receive a four per cent override for the first $25 million, an eight per cent override for $50 million and 12 per cent for $100 million.

“When there are a number of planners together in an office, the pool effect of their business will generate a volume override as well,” Brown says.

At the time of the Bridges writedown, Bleakley said the group would eventually recoup profits by boosting funds under management by way of increasing the number of financial planners on its books.

That plan is now well underway and Bridges is recruiting via its existing offices and networks, as well as casting its net further afield to bank-based financial planners.

“We’re looking for 35 or 40-year-old planners who have been well trained by the banks, but now want to own their own client base and develop a business with us,” Brown says.

“We find planners from the larger institutions are looking for a much closer sense of belonging,” he says.

“Larger institutions are not understanding that people want to have a sense of identification and affiliation with a group. We think that represents an opportunity for us where those groups are failing.”

The dealership currently has around 38 existing practices, mostly in NSW, including three new offices in Dubbo and Sydney’s eastern and western suburbs, but has a keen interest in pushing into regional Australia, particularly Victoria.

If Bridges sounds like your thing there are two ways to get in: one is to join an office of existing planners, the other is to establish your own practice.

If you go the start-up route, Bridges is prepared to contribute towards the establishment costs.

“We would do a strategic business plan for you, and look at the resources you are going to have,” Brown says.

“We could help that business with a bit of seed capital to get it going — a little bit of money, a little bit of marketing support, and some help to get it branded and launched.”

But the start-up help is just one part of a recently implemented program that Bridges has put together to attract new planners.

Not as nasty as it sounds, the Recruitment Incentive Package (RIP) offers new planners who join the group a modest base salary in their first year.

The salary of $36,000, plus bonus structure, is intended to keep new planners on their feet, before moving them into a commission structure.

“We asked ourselves what people would want and need to transfer from another dealer group, and some will need a bit of help in that first year,” Brown says.

“We expect by the end of the second year that people will be generating enough to cover that about three times over.”

On top of the first year salary scheme, Brown says the group’s mature planners provide a mentoring approach to help develop the incoming talent and this mentoring process also paves the way for future succession planning.

“After so many years at Bridges, we’ve got more mature, successful planners who provide a mentoring approach to help develop the talent coming from these bank aligned groups, and also to provide themselves with succession planning,” Brown says.

“Many of the top businesses have been established over many years. The planners are looking to ensure that their business will continue, and that they have an exit strategy for new planners.”

There is also the added attraction of credit union generated leads. But that raises the prickly question of client ownership.

Brown says Bridges takes the view that the client owns the client, but given that the group is sourcing leads for their planners, it does have an interest in the business.

“The agreement with new recruits is that if they generated the clients then they are their own. We negotiate on the clients that were generated by the credit union side of the business, but if the client wants to move with the planner, then we can’t stop the client doing that,” Brown says.

Also on the drawing board is an adviser equity participation program, which Brown says may come to fruition if Bridges is successful in growing the business.

“It’s still in discussion with the Tower board,” he says.

“But the more the group grows, the more equity participation there ultimately is.”

Brown claims the group’s compliance is already best practice, with every plan checked by head office. This, he says, ensures consistency and high standards which helps with professional indemnity cover.

All in all, Brown believes Bridges has a good offering for planners wishing to escape the large institutional dealerships.

“They may like the strong nature of a dealership that’s not so small that it’s a compliance risk, but not so big that they’ve totally lost sight of the planner,” he says.

Vital Statistics

Year established:1985

Number of planners:Around 130

Funds under advice:$4 billion

Number of clients:50,000

Target market:Credit unions

Commission vs fees:Commission

Adviser/dealer:90/10

Ownership:Tower

Offices:Nationwide

Key figures:David Bleakley, managing director; Paul Brown, head of financial planning

Platforms:The Portfolio Service, Bridges owned

Research:van Eyk Research and internal