Corporatising your business

Advisers have embraced the need to make their practices more efficient through better systems and processes (‘systemisation’) but have ignored the factor that will make the biggest difference to their business value — namely ‘corporatisation’ of their client relationships. The reason is a mistaken belief that corporatisation means ‘push button planning’.

Ramping up the value of your business

There is a view that the more systemised a business is, the more valuable it is. To an extent, this is true. However, advisers tend to place too much emphasis on the role that systemisation plays in increasing the value of their businesses.

Systemisation only protects the relationship advisers have with clients. It does not enhance or strengthen the client relationship nor does it make that relationship easily transferable from a selling adviser to a buying adviser, and this is the factor that really ramps up business value.

So, how do we make our relationships with clients more transferable, thereby increasing business value? Many have tried to do this by extending systemisation to the delivery of advice to their clients. What often results is whatChallenger’s Chris Cuffe once called “shrink-wrapped advice run off a production line”.

Kath Bowler,CPA Australia’s financial planning spokesperson (and an industry expert on the panel that reviewed plans for the recent ACA/ASICsurvey), stated that “the high incidence of off-the-shelf plans was a significant contributing factor” to the generally poor quality of financial plans surveyed.

If pure systemisation of client advice leads to a sacrifice in the level of quality and personalisation that clients expect, what is the solution? The solution is not to systemise, but to corporatise the adviser/client relationship.

Quite understandably, the biggest issue from a buyer’s point of view is the question — will clients ‘stick’ after the business is sold? If the face-to-face client experience around the advice process is not corporatised, and therefore sits with each individual adviser and not the business, this will significantly limit what a buyer is willing to pay. Alternatively, it will increase the risk to the vendor, as most earn-out models are based on the success of clients transitioning to the new adviser, once the old adviser has gone.

Corporatisation represents customised advice

Inaccurately, some industry commentators have accused firms that have advocated the corporatisation of advice of providing ‘production line advice’. The truth is that corporatising the advice process involves the delivery of customised advice for each client, within a consistent framework, across all advisers within a practice. Corporatising is about embedding the characteristics of good financial planning.

It starts with the use of technology to engage with clients in the initial meeting. The use of the same technology by all advisers in a business to visually demonstrate the choices that clients need to make in their financial lives is one way to build consistency (and transferability) in the client experience. It also makes it easy to replicate this experience if advisers leave the business.

Corporatisation is not a process of ‘categorising’ clients into a standardised solution — it is a way to help clients, using adult learning principles, come to their own conclusions about how to achieve their financial goals. Clients experientially understand and become empowered with the adviser as their guide, rather than a ‘guru’ or a ‘trust me’ salesperson. This positioning as a guide is a superior way to build a long-term relationship with the client.

True engagement serves to educate clients that the asset allocation decision is just one of a series of important decisions they must make. Arguably, for many clients, the other factors in their control (how much they save, their spending, time to retirement and so on) have a bigger impact on the achievement of their goals than the asset allocation decision — a fact that can be attested through simple modelling.

Whether a single multi-manager fund is used, or multiple funds, or a combination of managed and direct investments, the method of implementation is simply a measure of efficiency for the adviser and a reflection of how ‘hands-on’ the client wants to be. What matters is that clients have well diversified portfolios built on fundamental principles that enable changes to the portfolio to be implemented in a cost and tax effective manner.

Corporatising the advice process is not the ‘sausage machine’ approach to advice. It is simply a process by which advisers can use a number of tools to engage and have consistent conversations with clients.

These conversations can be transferred between advisers — and service staff — and from a shareholder point of view, can be delivered by a buyer, as the future expectations of clients were clearly set and can be met by their new adviser.

So, corporatisation is not about push button planning but rather customised planning where the entire firm can deliver to the ongoing service expectations. It is better for the client, better for the adviser, better for other staff in the practice, and creates enduring, superior shareholder value.

Corporatisation takes 12 to 24 months, but the benefits are well worth it.

Nick Brinkworth is regional manager,Ipac Equity Partners .