Fiducian grows its Field of Dreams

After six years in the business, Fiducian Group has expanded to become one of the bigger boutique players in the market. With one acquisition already under its belt this year, the company is growing, and growing quickly.

The group has developed its own systems and technology, its own research and investment funds, and its own distribution mechanisms. It has an existing franchise of 17 financial planning operations, which will grow to 22 by the end of the month and, if things go according to plan, to 100 franchises within two years.

But Fiducian managing director Indy Singh still keeps a fax that was sent to him years ago by a friend, to remind him of days when times were tougher and he worried his business might never materialise the way he envisioned.

The fax reads: “If you build it, they will come” — a direct reference to the 1989 box office hitField of Dreamsin which all-American heart-throb Kevin Costner plays a small-time Iowan farmer who hears a voice calling from nowhere: “If you build it, he will come.”

In the movie, Costner heeds the heavenly voice and builds a baseball field in the middle of his corn field. Sure enough, a flood of professional baseball players, including baseball legend ‘Shoeless Joe’, flock to his field to play, and his dream is realised.

Similarly, though he is the first to admit the Costner connection is somewhat comical, Singh had a vision — to build a financial advisory network, complete with a state-of-the-art administrative system and a full suite of fund management services. He built the network, the advisers came — and they are still banging at his door today.

The pace of growth at Fiducian is so rapid that Singh has his sights set overseas, and ultimately hopes to see the company become a global name in the industry.

“Australia is at the forefront of financial planning services. Our technology is catching up to the United States, our financial planning relationships are more developed and we have more empathy with our clients,” Singh says.

While he has no immediate plans to set up shop offshore, he believes Fiducian’s business model could be easily replicated in foreign markets.

“Our model could be transported by taking shares in an existing overseas business, though at the moment people seem to think that moving overseas will lose money, and we won’t move overseas if it means our shareholders suffer,” he says.

For the moment, Fiducian will focus on growing domestically. In May, the group acquired Bodinnars Personal Financial Planners in a deal worth $3 million. The acquisition was the first of its kind for Fiducian, and Bodinnars will be fully integrated within the group.

Other acquisitions could be in the pipeline, though Singh says: “I wasn’t keen on making acquisitions at first, but Bodinnars is one of the oldest and most respected financial planning groups in the business, and we are now looking to buy businesses that have a synergy with our existing business.”

Fiducian distributes its services in two other ways — through dealer groups that have been incorporated within Fiducian but continue to operate independently, and through its franchise of financial planners (called Fiducian Financial Services), currently comprising 17 associated dealers or agents, with numbers growing fast.

“We want serious financial planners, not people with an associated business who think: ‘Financial planning? We’ll do a bit of that’,” Singh says.

Fiducian aims to provide an all-encompassing service for financial planners, from back-office and administrative support, to research and tools to monitor clients’ needs, software, training, paraplanning and technical support.

By offering a full range of services, Fiducian lets financial planners get on with the business of generating wealth for clients.

In return for their participation in Fiducian, advisers are also given an equity stake in the group. This concept was initially criticised, because clients were said to be bearing the brunt of the cost of equity on behalf of financial advisers. But the model has since been imitated by other companies, with foreign companies also looking to replicate the Fiducian relationship between equity and advisers.

“The proof of the pudding came when others tried to emulate us — suddenly everyone was talking about equity,” says Singh.

But even Singh does not fully understand what he has built, and why it works. Financial planners within the Fiducian network are essentially vying for the same business — yet Fiducian planners don’t behave like competitors. Instead, they co-operate, exchange ideas and support each other, according to Singh.

Nonetheless, most financial planners would probably prefer to be independent, if they felt it were financially viable.

“Until the onset of wrap platforms, financial planners used to be happy to outsource administrative functions to fund managers, if it meant they could preserve their independence and focus completely on their clients — but what focus do you have if you go bankrupt?”

The demands of today’s regulatory environment are making it even tougher for smaller businesses to survive. Many firms are turning to dealer groups like Fiducian because they offer a more thorough set of financial planning tools than they could ever develop themselves.

“Financial planners that refuse to outsource can’t be truly profitable, because their operating costs are too expensive — it is becoming increasingly difficult to run small to mid-sized practices,” Singh says.

Under the terms of the Financial Services Reform Act, introduced in March 2002, financial planners are required to demonstrate minimum compliance standards and lodge new licence applications with the Australian Securities and Investments Commission (ASIC) — in addition to existing costs related to employing staff and investing in new technologies and back-office systems. Singh expects to see ASIC reject a large portion of new licence applications, in a bid to encourage smaller players to drop out of the industry or at least outsource elements of their business.

In September 2000, Fiducian listed on the Australian Stock Exchange (ASX) to raise capital for the development of its inhouse administration system.

Listed financial planning dealer groups typically suffer from weak stock market prices, and Fiducian is no exception, with shares currently trading under $0.90.

“Weak prices relate to the current market environment, and small shareholders moving in and out of the market can have a significant impact on the price of stock,” says Singh.

He believes Fiducian stock is undervalued and says the company has been profitable since its inception in 1996, in spite of the firm’s significant investments in technology and expansion.

Fiducian is on the verge of launching a suite of financial planning software, which will be rolled out to its network of advisers by the end of this month and could eventually be available to third-party users.

Meanwhile, Fiducian is continually building on its two wrap platforms (one superannuation and one non-super wrap) that offer a number of different funds, including Fiducian’s ‘Manage the Manager’ funds, which operate on the premise that an averaging fund should grow in value over the long-term.

Singh has grown his business around the assumption that anything can be built on top of a strong foundation.

Fiducian was built on the strength of its inhouse administrative system, and from here, its growth has the potential to be boundless.